The Impossible Dream

Even in these troubled, times there are still many Dubai properties being sold for over US$ 2.72 million (ten million dirhams). According to statistics from Data Finder, the leading locations were Downtown (34 deals), Palm Jumeriah (31), Business Bay (five) Jumeirah (four), JBR (four) and Dubai Creek Harbour (four) over the first ten months of the year. Two projects accounted for 31 of these deals – Il Primo in the Opera District of Downtown, with 18 transactions, and the Palm Royal Atlantis Resort & Residences making up 13 of the total. The most expensive apartment sale so far has been for US$ 20 million at The One at Palm Jumeirah.

Villa sales fared even better, with 157 deals in the top five locations – Dubai Hills Estate (47 deals), Palm Jumeirah (43), MBR City (32), Emirates Hills (22) and Jumeirah Golf Estates (13).The average price for villas sold in Emirates Hills was estimated at US$ 7 million.

October figures from STR indicate the Middle East hotel construction pipeline stands at 434 projects and 120k rooms; no surprise to see that the UAE accounts for 38.3% of the total, with 52.8k rooms, followed by Saudi Arabia’s 38.9k.

Capri Palace becomes the latest property to be added to the Jumeriah Group’s portfolio of managed hotels, due to reopen next April, after major renovation work. Founded by Tonino Cacace in the 1960s, it has 68 guest rooms and is home to three of the island’s Michelin stars, including the hotel’s signature restaurant L’Olivo. The Dubai government-owned company operates other properties in Europe including in London, Mallorca and Frankfurt, as well as in the Middle East, China and the Maldives.

Having just opened its third hypermarket, near Burjuman Metro Station, and its fifteenth branch in the emirate, Lulu is planning a further six more outlets for Dubai. The Abu Dhabi-based retail group now has 74 outlets in the country, having opened fourteen this year, compared to nine in 2018 – an indicator of its confidence in the local economy, as are its plans for twenty-two new projects in the near future.

Following its recent agreement with Careem/RTA, Canada-based PBSC Urban Solutions announced more details about its upcoming launch of an electric bike-share network, starting with its deployment of 3.5k E-FIT electric pedal-assist bikes and 350 smart stations throughout the emirate. This is the Canadian company’s first regional foray, following several successful launches including in Barcelona, Buenos Aires, Monaco and Santiago, involving 84k bikes and 6.8k stations.

Whilst placing Kuwait as the bottom of their table in the Expat City Ranking 2019 by InterNations, Dubai found itself, rather surprisingly, rated 34^th of the 82 cities surveyed, behind other regional locations such as Abu Dhabi (15^th), Manama (21^st) and Muscat (28^th). Taipei, Kuala Lumpur, Ho Chi Minh City and Singapore were the four leading destinations for expats to reside, whilst Rome, Milan and Lagos propped up the table with Kuwait. Dubai’s position was not helped by being placed 71^st for its “work life”, with less than half polled said they were happy with their work-life balance (cf 60% globally), and 45% feeling insecure in their job (cf 59%).The only conclusion is that such surveys should be taken with a very large pinch of salt.

Another study ranks Dubai 7^th when it comes to most visited global cities with 16.3 million visitors. As in the past the top positions were dominated by Asia, with Hong Kong, Bangkok, Macau and Singapore taking the top four positions.

Dubai-based AquaChemie Middle East is planning a US$ 40 million spend to build a chemical terminal facility at Jebel Ali Port to be used as a strategic petrochemical gateway hub. Mott MacDonald has been appointed for the design, engineering and project management work and the project is expected to take eighteen months. The company will be able to utilise the facilities at the port including multiple jetty pipelines, along with other crucial existing utility and building support infrastructure. It is expected that 100 new jobs will be created, with that number doubling by 2025.

DP World added to its ever-expanding portfolio by acquiring a 77% stake in Singapore-based Feedertech Group, via its subsidiary Unifeeder, for an undisclosed sum but less than 1% of the parent’s net value; the seller will retain the remaining 23% shareholding. The aim of the exercise is to build an end-to-end logistics capability, soon culminating with a dedicated and efficient India-Gulf region service. Feederetch, with annual revenues of over US$ 100 million and movement of 600k TEUs (20’ ft equivalent units), will help in this regard as it operates two business units – one that moves containers from smaller ports to larger container terminals and the other that operates short sea networks.

Just like DP World, dnata continues to expand its global reach – this time announcing that it had bought the remaining 50% share in its UK in-flight catering JV, Alpha LSG, from the LSG Group. The seven-year old company, employing 3.5k across fifteen airport catering units and two central production facilities, posted annual revenue of over US$ 375 million. This acquisition follows several others already this year, with dnata having opened new facilities in Boston, Houston, Los Angeles, San Francisco and Vancouver which have seen its expanding catering division now employing over 10k.

The Majid Al Futtaim Group is planning to invest over US$ 1.5 billion in Saudi Arabia and Egypt, (including a US$ 866 million mall in Cairo), over the next three years as it ramps up its expansion drive. Over the past four years, Dubai-owned MAF has spent over US$ 2.2 billion in Egypt whilst much of the Saudi investment will be in cinemas, as part of its five-year US$ 4.3 billion investment plan, where it already has one hundred cinema screens since the ban on commercial cinemas was lifted just two years ago. Later this month, the Group will open a Carrefour in Uganda and plans to open seven next year in Uzbekistan.

Over the past two months, it is reported that Emirates NBD has shed 500 jobs, about 4% of its 12k employment numbers, because of the need to cut costs in a slowing economic environment. Its retail and technology operations faced the brunt of these job losses. This comes despite Moody’s Investors Service indicating that the operating conditions for GCC banks remain favourable, being underpinned by solid economic growth, and by the banks’ solid liquidity and strong capital buffers; furthermore, the ratings agency expects the region’s average non-hydrocarbon GDP growth to push higher to 2.6% next year.

So far this year, total volumes, at 21.9 million and valued at over US$ 400 billion, on the Dubai Gold and Commodities Exchange (DGCX) are on track to easily beat last year’s figure of 22.3 million. For November, the best performing asset class was again the Indian rupee which showed a YTD 17.0% improvement, with the best performing being the exchange’s flagship Gold Futures product, with YTD volume growth 94%.

With collaboration between UAE and Chinese police, more than 28k fake luxury items, worth US$ 257 million and destined for sale in Dubai, have reportedly been seized. 75% of the goods were in Dubai where police raided ten locations and arrested twenty people. A further 37 were charged in China where police found 7k counterfeit luxury handbags in Guangdong Province. Along with the fake goods, it seems that certificates, invoices, receipts and gift wrapping were also being produced.

Sunday, 01 December, saw the UAE’s Federal Tax Authority include sweetened drinks, electronic smoking devices and tools, and the liquids used in these devices, added to the list of products now subject to excise tax. They now join products such as tobacco and tobacco products, energy drinks, and carbonated beverages which have had tax levied since October 2017. Khalid Ali Al Bustani, director general of the FTA, commented that “Implementing the new decision is in line with our wise leadership’s directives to further enhance the UAE’s competitiveness, build a healthy community by curbing consumption of harmful products, mitigate damages and costs incurred while combatting diseases that result from consuming these products, and supply the resources necessary to support the government’s expansion and upgrade of its services.”

The bourse opened on Wednesday 04 December, following the extended National Day holidays, and, having shed 22 points the previous fortnight, regained 16 points to 2695 by 05 December 2019. Emaar Properties lost the US$ 0.1 gained the previous week to close on  US$ 1.12, whilst Arabtec, down US$ 0.23, over the past six weeks, was US$ 0.03 higher at US$ 0.34. Thursday 05 December saw continuing dismal trading of 134 million shares, worth US$ 37 million, (compared to 147 million shares, at a value of US$ 59 million, on 28 November).

By Thursday, 05 December, Brent, having, shed US$ 0.68 (1.1%) the previous week, closed US$ 0.58 (1.0%) lower at US$ 63.97. Gold, having declined US$ 12 (0.9%) the previous fortnight, gained US$ 22 (1.8%), closing on Thursday 05 December at US$ 1,483. Brent ended November on US$ 63.32 – up US$ 3.09 (5.1%) from its November start of US$ 60.23 and 17.7% higher YTD by from its 01 January opening of US$ 53.80. The yellow metal was down on the month by US$ 35 (2.3%) – from US$ 1,515 – but up US$ 199 (15.5%) YTD from its year opening of US$ 1,281.

It seems likely that OPEC will agree to an extension of its current round of production cuts, of 1.2 million bpd, maybe for the whole of 2020, at their two-day meeting starting in Vienna today. The cartel, to be joined by non-member countries such as Russia, Oman and Bahrain, may even increase that figure with Iraq supporting further cuts of 400k barrels. As usual, the main issue will not be the scale of cuts but members’ future compliance; recently, Saudi Arabia has helped with this problem by actually cutting more than it has been required to do, so that the total cut number was achieved. It is reported that the likes of Nigeria, Ecuador, Malaysia and Brunei have had problems meeting their quota. If disagreements do arise and no agreement reached, oil prices could drop by as much as US$ 20 in the short-term.

The Aramco 1.5% regional IPO, hoping to raise US$ 25.6 billion, was oversubscribed by 234%, pointing to the fact that shares will be valued at the top end of earlier expectations. Of the 3 billion shares on offer, two thirds were allotted for institutions (with six billion subscribed for) and the remaining one billion were for the retail sector which was 1.5 times over the number of shares offered. Although the issue was favourably met by the market, it was nowhere near the interest of that for Saudi Arabia’s National Commercial Bank in 2014, where the retail portion was 23 times oversubscribed. It is thought that the share value will be in the region of US$ 8.00 to US$ 8.50, which would value the energy titan at up to US$ 1.7 trillion. Any dip in the oil price could see this value decline 25% in the short-term – another reason why the government is willing to support a continuation of oil production cuts into 2020.

Daimler is the latest big-name car maker to announce global job cuts  – at least 10k, coming days after Audi said it would lose 15.5% of its current 61k German workforce.; the main reason given was to raise more finance for the switch to electric cars, with the industry going through “the biggest transformation in its history”. Daimler expects to save over US$ 1.5 billion by introducing the personnel cuts and reducing the number of management positions worldwide by 10%.

In a move to boost profitability, Energy firm Npower, owned by E.On,  is to cut up to 4.5k UK jobs,  including three call centres, as it plans to merge computer systems to save money; this restructuring plan is set to cost Npower US$ 640 million and would result in small businesses and consumers being served by the same computer systems and customer service teams. The big six industry players have not been helped by the energy price cap and, at the other end of the scale, there have sixteen small energy companies going out of business since 2018. So that leaves those mid-sized companies picking up business because they tend to have newer computer systems and are better able to serve their customer base. Two years ago, they held 18% of the household energy market, rising to its current 30% level which could rise to 50% over the next four years.

London-listed Network International will focus on regional expansion rather than looking for new markets. The payments solutions company, with H1 revenue and profit both heading north, by 12.4% and 13.9%, reckons that the MENA region has huge untapped potential; it has recently renewed contracts with two of its largest customers, Emirates NBD and Emirates Islamic. Since its April IPO, NI has posted low double-digit growth from its two main business lines — merchant and issuer solutions – driven by selling additional services and expanding its customer base.

No country seems to be immune from what is happening in the global High Street and Australia is no exception. The latest retailer there to go into voluntary administration is popular women’s fashion brand, Bardot. The 23-year old women’s fashion brand has gone into voluntary administration, joining an ever-growing list of struggling Australian retailers.; it has 72 stores employing 800. Over the past year, the likes of Karen Miller, Napoleon Perdis Cosmetics, Shoes of Prey, Ed Harry and Roger David have entered into administration. The main factor behind its demise is that, despite double digit growth in online sales, it is operating in a highly competitive retail environment and having to compete in a “highly cluttered and increasingly discount-driven market”.  Fashion rivals include Country Road, H&M, Sportsgirl, Top Shop and Zara.

Relying on solar energy can present its own problems as can be seen In Perth where over a third of all houses has a solar installation; now this solar capacity is far greater than that of an ageing 854-megawatt coal-fired power station and this is where the problem begins. There is a fine balance between the two energy sources and there is a tipping point that could result in regular black-outs for this part of Western Australia, which is probably the most advanced in the world when it comes to alternate energy supplies. Because Perth is considered the most isolated city in the world, it cannot rely on “neighbours” to help if there is a supply shortage. Solar works best when, on mild, sunny days in spring or autumn, consumers are not using air conditioners, leading to an excess of solar power piling into the system and thus reducing the power needed from the grid. In short, high levels of solar output tend to go hand in hand with low levels of demand, so there is surplus capacity when not really needed. If that happens the obvious solution is to scale back or switch off the coal- and gas-fired power stations. However, most power stations are not equipped to be turned on and off at a whim. Now experts are trying to work out on how best to integrate solar and storage and, if no progress is made, authorities warn of a “real risk” of a system-wide blackout, especially when soaring levels of renewable energy periodically overwhelm the system.

Those who thought that the Australian economy would start turning north again got a rude awakening, as the Q3 GDP growth dipped from 0.6% to 0.4%, quarter on quarter, with a marked shift in household consumption, with an increasing number of households apparently saving more of their tax return rather than spending it; indeed, discretionary spending was at its weakest growth of only 0.1% since the GFC, whilst the household saving rate rose to 4.8%.  Most of the growth was attributable to government infrastructure spending and increased exports, contributing 0.2% to the GDP growth. Other indicators, that added more gloom, were dwelling investment being 1.7% lower, (its fourth consecutive decrease), and November new car sales 10.0% lower from a year earlier. The RBA’s latest 2.3% annual growth forecast for this year would mean that Q4 would have to have an 0.7% rise which seem highly unlikely.

There was no surprise to see India’s economy posting its weakest growth, at 4.5%, since 2013 and down from the 5.0% annualised growth recorded in the previous quarter; October saw core infrastructure industries’ output posting its biggest contraction since 2005, declining 5.8%. The three main drivers, behind Asia’s third largest economy recording worrying results, include export demand faltering, weaker consumer demand and business investment slowing. Many of the problems seem to be self-inflicted. with much of the blame laid at Prime Minister Narendra Modi’s door. He has aimed to steer the economy in a positive direction by slashing corporate tax rates, introducing more privatisation of public entitles and setting up a special real estate fund. India’s 14^th prime minister, six months into his second five-year term, was overseeing quarterly growth rates of 9..4% as late as 2016 – now he has his work cut out to reverse the downward spiral, not helped by the fact that because of a boost in spending and lower tax revenue (because of the recent cuts), he will fail to hit his fiscal deficit target of 3.3% of GDP.

With sales of over US$ 7.4 billion, Black Friday saw the second biggest ever US online sales day, behind Cyber Monday, as an increasing number of shoppers are now using mobile devices rather than computers; Friday posted a record US$ 2.9 billion of sales via smartphone. The ongoing transition from the traditional computer, as a purchasing vehicle, encourages potential customers to shop three days earlier and not wait for the following Monday. It is estimated that 20% of the total holiday season spend will occur over the five days from Thanksgiving to Cyber Monday. with an increasing amount being diverted from in-store buying.

The Bank of England’s Canadian governor, Mark Carney, is leaving the post next month and has been appointed United Nations Special Envoy for Climate Action and Finance; he swaps his current annual US$ 1.3 million package for a nominal remuneration of US$ 1. The 55-year old was an apparent avid opponent of Brexit claiming, at the time of the 2016 referendum, that it was the most significant risk to the country’s financial stability, that had “pushed up uncertainty to levels not seen since the euro crisis”, only to apologise later for getting it wrong. Accused of scaremongering at the time, the former Goldman Sachs banker had to admit months later that “financial stability risks are greater on the Continent than they are in the UK”. In October, he had supported the new Brexit deal as “welcome” and a “net economic positive” – but this was rejected by the shambolic British parliament – the supposed home of democracy.

All is not well in the eurozone as manufacturing activity dipped for the tenth straight month, albeit the November figure of 46.9 was up on the previous month’s 45.9; any figure below 50 indicates contraction. One sign of optimism was a 3.4 jump in the future output index to 55.3, whilst new orders, employment, raw materials purchases and backlogs of work all declined – but at a reduced rate. Germany, the bloc’s biggest economy, saw its manufacturing sector also grow at a slower rate but should still post a miserly 0.2% growth in Q4, following a 0.1% improvement last quarter and an 0.2% contraction in Q2.

China’s factory activity in November surprised even the most optimistic of analysts, as it surged to a three-year high and comes on the back of upbeat government data released earlier in the week. The Caixin/Markit manufacturing rose 0.1, month on month, to 51.8, with the market expecting a lower 51.4 reading. Although lower, month on month, total new orders and factory production remained at buoyant levels in November; a month earlier, both readings had grown at their fastest rate in six years and almost three years respectively.  Furthermore, a recovery in the labour market saw companies adding workers for the first time in eight months. These figures indicate that the country’s 2019 growth will come in marginally above 6.0% – and although acceptable on the global stage, it will be the country’s worst return in thirty years.

There are problems – other than the ongoing US trade war – that face the world’s second largest, but soon to be first, economy, including deflation, with input costs rising as output charges head in the other direction. With slowing export levels, declining profit margins and weakening business confidence, the country needs a major economic boost. Even though the past year has seen major tax cuts, and much higher infrastructure spending, the government has fallen well short of its target and, to date, has gained little traction. In a bid to attract more public works, it has brought forward US$ 142.0 billion of the 2020 local government special bond quota and has cut some of its key lending rates to reduce corporate financing costs. The problem for the government is if it were to be more aggressive with tax cuts and public spending, it may well heighten financial risks and add to a mountain of debt – a risk that it is evidently not willing to take. On top of that, there are the fallouts from the US tariffs and increasing tensions in Hong Kong.

Argentina and Brazil have been warned that President Trump is considering restoration of up to 25% tariffs, which were initially imposed, and then waived, on steel and aluminium imports arguing that their respective weaker currencies, following, “a massive devaluation”, have made it harder for US food exports to compete. Brazil is the world’s tenth biggest steel exporter and accounts for 3.7% of the country’s exports. The US president, with next year’s elections in mind, has to protect the farming interests in his home base where the sector witnessed a 24% increase in bankruptcies over the past year.

Monday saw the country celebrating its 48^th National Day, with HH Sheikh Mohammed bin Rashid Al Maktoum stating that the national economy had made “great strides” thanks to the UAE’s resilient and flexible legislation. The Dubai Ruler highlighted the government’s strategy to take advantage of the dawn of the Fourth Industrial Revolution, as the UAE, with the aid of AI, positions itself as a “model for interactive cities”. He reiterated that “We will continue to deliver the future for our generations to come. The occasion we are celebrating today is teeming with a myriad of lessons that we have learned from our founding fathers, who instilled in us an ambition and will to cope with the changes in the world and to utilise our full potential.” Sheikh Mohammed also mentioned that the word “impossible” is now void, after the achievements of the country and its progress in recent years. The Impossible Dream.

The World’s A Mess                                                                                     21 November 2019

The latest Knight Frank report shows that for the second straight quarter, Dubai prime property prices registered an 0.2% rise, following an 0.3% jump in Q2 – an indicator the downturn may be coming off its four-year bottom. Despite this glimmer of hope, annual prices had fallen by 3.7% and Dubai was ranked 40^th out of 45 global real estate markets surveyed. The average annual price rise was just 1.1%, with Moscow topping the table and Seoul at the other end.

With limited details available, Emaar has announced it will majority-own a build-to-sell property development, The Valley, in a US$ 6.8 billion JV, located on the Dubai – Al Ain Road. Earlier in the month, the developer reported a 17.1% decline in nine-month profit to US$ 564 million, but a 25% hike in property sales to US$ 3.4 billion. YTD, its nineteen new residential developments totalledUS$ 2.8 billion and it also has a US$ 9.8 billion sales backlog; it has also handed over 4.7k units so far this year.

With no new local launches expected for the foreseeable future, and still 37k units under development, troubled Damac is looking for expansion in new overseas markets, including resorts in the Maldives, Seychelles, Bali and Marrakech, rather than adding to the “large oversupply problem” in the UAE. The developer, having sold over 8k units over the past two years, with a further 4k expected in 2020, is only going to sell what they have launched to date and will not start anything new into the local market which they believe is over-supplied and have called for a freeze on future developments.

There will be a new addition to Dubai’s retail sector – with four-year old b8ta set to open its first international venture in the emirate. The retail-as-a-service company, with sixteen US locations, provides retailers with a space to showcase their products, with its aims to make physical retail accessible for product makers and exciting for consumers.

Nakheel Mall is set to open next Thursday, 28 November, in time for National Day celebrations. Located on Palm Jumeirah, the mega retail destination, costing US$ 327 million, will host over three hundred shops, restaurants, entertainment outlets and services, split over five levels. Along with a 14-screen Vox Cinemas complex, it will have car parking for 4k vehicles and will also serve as an access point for The View at The Palm, a public observatory on top of the 230 mt The Palm Tower.

The RTA and Careem signed a fifteen-year agreement for the Dubai-based ride-hailing firm to initially operate 1.75k bicycles across 175 docking stations and becoming the region’s first bicycle-pool phased program. The project will double that figure over the ensuing five years. Riders will be able to take advantage of the extensive network of cycling tracks that have sprung up over the past decade to 274 km and this will more than double to 632 km by 2023.

With the Sunday start of the Dubai Air Show, Boeing has spent time, with both of Dubai’s airlines. With the delivery delay (again) of the Boeing 777x, there is need for a schedule review of the 150 aircraft on order, especially as the plane-maker is still having its problems with the embattled 737Max. Furthermore, there is still the possibility of a 787 deal.

Boeing confirmed that it was working with flydubai to ensure that its grounded fleet of fourteen 737 Max aircraft is “preserved well”, ahead of its return to the skies. There will be an inevitable financial settlement for losses incurred by the Dubai airline, but no details have yet to be given; earlier in the year, chairman Sheikh Ahmed bin Saeed Al Maktoum indicated that the airline had a “right” to ask for compensation over the Max groundings. Boeing also confirmed that live pilot evaluation will soon take place which is a precursor for full certification so that the plane may be back in the skies by early Q1.

By the second day, Airbus had scored two major deals – an Emirates order for fifty A350-900s, with a list price of US$ 16 billion, and Air Arabia’s US$ 14 billion order for a mix of A320 Neos, the larger A321 Neos and the longer-range A32XLRs, to be delivered starting in 2024. The Emirates agreement replaces an earlier US$ 12 billion February outline deal that was for thirty A350s, which also included A330 Neos; negotiations are on-going between both parties relating to forty A330 Neos.  Boeing did not fare as well but did reach an agreement from Turkey’s SunExpress for 10 additional 737 Max jets, exercising options on top of its existing order of 32 Max aircraft, as well as  787-9 Dreamliners to Biman Bangladesh Airlines in a deal worth a reported $585 million.

The third day started with orders worth US$ 6 billion for fifty 737 Max from two airlines. Air Astana, Kazakhstan’s national carrier, weighed in with a thirty-plane order, valued at US$ 3.6 billion list price, along with an unknown airline placing a US$ 2.3 billion order for ten Max 7 variant and 10 of the larger Max 10. Ghana’s newly launched airline, 10% owned by the government, made an order for three Boeing 787-9 wide-bodies, worth US$ 878 million. Senegal, signed a preliminary order with Airbus for eight A220s worth US$ 732 million. Other orders reported included EasyJet’s US$ 1.3 billion spend on twelve Airbus A320 neos, Turkish carrier SunExpress’s US$ 1.2 billion investment in ten Boeing 737 MAX. It wrapped up on Thursday with orders totalling US$ 54.5 billion, 71% of which emanated from sales orchestrated by Emirates and Air Arabia, and a record attendance of 84k, with 1.3k exhibitors; total sales from the last event in 2017 was more than double at US$ 113.8 billion

The five-day event has also seen plenty of activity from the defence sector particularly when one sees that seven of the top ten biggest spenders, (as a proportion of GDP), are located in the MENA region (Middle East and North Africa). All the leading global companies – including Lockheed Martin (the largest in the world), BAE and Dassault –are showing their wares. Top of the rankings is Oman, which spends 11.0% of its annual economy on defence, followed by Saudi Arabia’s 10.8%; this is three times more than the 3.1% US figure and five times more than the less than 2% spent by some NATO members.

The UAE’s Ministry of Defence invested US$ 1.9 billion on the first day, signing deals with ten different local and international companies, with the two biggest being for US$ 954 million, with UAE-based Global Aerospace Logistics, and US$ 463 million with French aerospace company Dassault Aviation for enhancements on its Mirage fighter jets. Halcon, a unit of the UAE’s new defence giant EDGE, signed a US$ 1 billion contract to deliver its Desert Sting-16 range of precision guided weapons to the UAE Armed Forces

ON.DXB is a new regional festival that aims to further stimulate Dubai’s growth as a global platform for companies and talent in film, gaming, video and music – sectors that are being driven by digital technology. There is no doubt that content is primarily driven by western media but there is increasing demand for more local original content from gaming to music to TV; this event is but one initiative to drive the strategy forward and put Dubai firmly on the global creative map. Major gaming industry leaders, including – Hiba Muhareb, co-founder of Shanab Games; John Lacey, MD and founder of Power League Gaming; influencer Ahmed Al Nasheet; MC Baraa Andullah; Mohammed Alturkistani, the MENA Director at Tentacle Gaming; and RobocomVR founder Karim Ibrahim – will be attending the event. In October, the emirate hosted Insomnia Dubai, the region’s largest gaming festival, and next month it will be the location for Girlgamer Esports Festival, the world’s leading esports event for women.

HH Sheikh Mohammed bin Rashid Al Maktoum has enacted a new DIFC Intellectual Property Law, encompassing a wide range of subjects including patents, utility certificates, industrial designs/drawings, copyright, trademarks, trade names and trade secrets. The new legislation sees the creation of the new office of the Commissioner of Intellectual Property which will have the responsibility for administering the law, resolving disputes and imposing fines. The law covers all related DIFC affairs and is in line with global standards befitting the world’s eighth ranked international financial centre.

Sheikh Mohammed also issued Law No. (10) of 2019, which partially amends Law No. (24) of 2009 on the establishment of the Dubai Financial Support Fund. Under the new regulations, the Director General of the Dubai Department of Finance is authorised to supervise all administrative, technical and financial affairs of the Fund. He will be also responsible for approving the Fund’s organisational structure and budget and submitting them to the Executive Council of Dubai for final approval.

DP World is nearing the completion of a major Egyptian expansion and, when Basin 2 is completed by the end of next June, it will nearly double the capacity at the port to 1.75 million TEUs per year. This particular US$ 520 million project has seen the Dubai company’s investment in the country top US$ 1.6 billion. The expansion of DP World’s Sokhna, the only port in the country capable of handling the largest container ships, cost US$ 520 million. As an aside, there was a bilateral agreement signed this week between the UAE and Egypt for a US$ 20 billion joint strategic platform to invest in a range of vital sectors and assets.

The latest legislation sees a new insolvency law that lifts the threat of criminal sanctions for clearing bad debts by decriminalising their financial obligations, whilst offering them an opportunity to work to resolve their financial dilemma. The new law will prove the ease of doing business in the country and will be beneficial for all stakeholders – the business community, the banking sector and the local economy. The law, to be introduced in January, will enable debtors resolve their liabilities, through court-appointed advisers, who will liaise with lenders on their behalf to reach a settlement, by rescheduling liabilities with an option to receive “new concessional loans”, probably with more relaxed repayment terms. However, it should be noted that bounced cheques will not be decriminalised under the new insolvency law.

A unit of Arabtec Holding has been awarded a US$ 100 million Emaar Misr contract to build a residential project at Greek Village in Egypt, comprising 42 town houses, 18 residential buildings and seven bungalows. This is the second contract this year for Arabtec Properties following an August US$ 111 award from the same developer to construct two projects in Cairo.

It was a disappointing Q3 for Arabtec reporting losses of US$ 109 million (compared to an US$ 18 million profit a year earlier), with revenue declining 31.0% to US$ 441 million; its Dubai-based fitout contractor Depa increased its YTD deficit to US$ 68 million following a quarterly loss of US$ 13 million. Over the nine months of the year, both revenue and profit declined – by 18.0% to US$ 1.6 billion and from a US$ 49 million profit to a US$ 103 million loss. The troubled developer attributed three factors for its problems – tight liquidity, a continued decline in the real estate sector and delays in handing over legacy projects. Employing 45k, it still remains the biggest publicly listed contractor in the country, with total assets of US$ 2.9 billion, net equity of US$ 324 million and a US$ 3.7 billion backlog.

Union Properties posted a Q3 29% slump in revenue to US$ 29 million, as its loss worsened 31.9% to US$ 22 million, driven by revaluations on financial assets declining from US$ 2 million to US$ 10 million. It now plans to focus on developing its land bank to create assets with recurring cash flows; finance costs rose 41.1% to US$ 13 million. Over the nine-month period to 30 September, revenue was 19.0% lower, at US$ 85 million, with a US$ 45 million loss, compared to a US$ 40 million profit a year earlier. The Motor City developer has incurred cumulative losses of US$ 567 million, following a 2017 write down in the value of its land by US$ 327 million and taking a further US$ 188 million hit, by reporting that about two million sq ft of its 14 million sq ft site to be undevelopable. Its September net assets came in 5.8% lower at US$ 798 million.

The bourse opened on Sunday 17 November and, having nudged up 2 points the previous week, dropped 17 points lower to 2684 by 21 November 2019. Emaar Properties, having lost US$ 0.09 the previous three weeks, closed US$ 0.01 lower at US$ 1.12, whilst Arabtec, dived US$ 0.13 and now has lost US$ 0.19, over the past four weeks, to end the week at US$ 0.35. Thursday 14 November saw continuing dismal trading of 64 million shares, worth US$ 54 million, (compared to 101 million shares, at a value of US$ 73 million, on 14 November).

By Thursday, 21 November, Brent, having shed US$ 1.01 (1.6%) the previous week, regained all those losses, and more, US$ 2.69 (4.4%) higher at US$ 63.97. Gold, having gained US$ 7 (0.4%) the previous week, was down US$ 10 (0.7%), closing on Thursday 21 November at US$ 1,463.

The preliminary valuation on Aramco has been set at between US$ 1.6 – US$ 1.7 trillion as the state oil company tries to sell 1.5% of its shares on the local bourse for US$ 25 billion – this is short of the initial US$ 2 trillion target and also lower than the 5% that was thought going on offer. At that time, it was expected that 2% would be issued on the kingdom’s Tadawul bourse, and a further 3% on an overseas exchange. Nevertheless, it will still potentially be the world’s biggest IPO and would value the world’s most profitable company north of US$ 25 trillion – slightly higher than the amount raised in 2014 by Chinese e-commerce giant Alibaba.

With future plans of focussing on mega projects, Exxon Mobil is planning to divest itself of some US$ 25 billion worth of assets, including oil and gas fields in Europe, Asia and Africa, as it attempts to free up cash to pay for these future projects. The oil giant has come late to the game as its main rivals, Shell and BP, have sold off major assets, totalling US$ 30 billion and US$ 65 billion respectively, since the 2014 energy market crash. The end result is that Exxon now has a negative US$ 9 billion cash flow, whilst Shell has already generated cash of over US$ 21 billion so far this year. The plan seems to be the Texas-based company to quit its upstream oil and gas business in eleven countries, so they would have cash to invest in new developments in Brazil, Guyana, Mozambique, Papua New Guinea and the US.

Two of Australia’s richest people, Mike Cannon-Brookes and Andrew Forrest, are investing in an ambitious project to export solar power from a giant 10-gigawatt plant in Australia to Singapore, via a 4.5k km transmission cable. The project has already raised tens of millions of Australian dollars that will allow developer Sun Cable to undertake development work. If successful, the project would meet almost 20% of the city-state’s energy needs.

Continental confirmed it would slash 5.5k jobs (2.3% of its current workforce of 240k) by 2028, as the demand for combustion engines slows and global vehicle sales continue to head south. According to its CEO, Elmar Degenhart, it urgently needs technological transition to strengthen its competitiveness and future viability. The move is expected to save US$ 600 million a year from 2023 and help finance new technology.

By Thursday, Bitcoin had had seven straight days of declines to fall below the US$ 8k mark for the first time in a month and also slipped below its 200-day moving average line; some analysts consider this to be a pointer to sell. The world’s largest cryptocurrency has witnessed fairly low trading volumes since August, as no new money entered the sector, and has seen stocks/bonds/gold all up in double-digits YTD. So far in November, it has shed 14% of its 31 October value.

Despite closing all but three of his twenty-five UK restaurants, and falling into administration, last May, celebrity chef Jamie Oliver is to open twenty-one new Jamie Oliver-branded overseas restaurants by the end of 2020; currently, there are 70 restaurants, all of which are run as franchises, in 27 global markets. The first two – Jamie Oliver Kitchen restaurants – will open this month in Bali and Bangkok. Although annual profits of the Jamie Oliver Group fell sharply, he paid himself a US$ 4 million dividend in 2018, although he had invested a lot of his own money to support his then failing restaurants.

In a bid to stem its US$ 1 billion H1 loss, WeWork is to slash almost 20% of its current 12.5k workforce, calling the cuts “necessary” in order to “create a more efficient organisation”, following the dramatic collapse of its September failed IPO. Earlier in the year, its major investor, Softbank, valued the company, which rents office space to freelancers and businesses, at US$ 47 billion – it has since pared this estimation to just US$ 8 billion.

Sheikh Mansour’s Manchester City posted a 6.9% hike in revenue last season to US$ 692 million, driven by a 20% jump in broadcast revenue, leading to a net US$ 13 million profit; since the Abu Dhabi 2008 takeover of the club, its revenue has risen more than six-fold. The 2017-18 season saw the club win an unprecedented quadruple of England’s domestic trophies – the Premier League, FA Cup, League Cup and Community Shield – whilst Liverpool lifted the big European trophy. Its revenue steam was still well behind Manchester United’s US$ 785 million but the “noisy neighbours” will probably surpass that, as it has signed a record ten-year kit deal with Puma, worth an annual US$ 85 million. However, it is being investigated by FIFA for allegedly flouting FFP regulations, by inflating the value of sponsorship deals – if found guilty, the club could face bans on transfers and from the lucrative Champions League.

The Australian Securities and Investments Commission is concerned that scandal-prone financial giant AMP appears to still be charging already dead customers, after the financial services royal commission had exposed over 3.1k deceased customers still paying their life insurance premiums. The authority’s chair, James Shipton, commenting on one recent case said “One thing I will say and unfortunately this is a vignette, an example of where their system is … their systems are obviously failing and there isn’t a magic, quick solution.” AMP was also found to be lying to regulators and charging hundreds of millions of dollars in so-called “fees for no service”. Since the royal commission, AMP has lost its chairman, chief executive and half of its board. What happened to the other half?

Another bank in trouble again is Westpac, with theAustralian Transaction Reports and Analysis Centre accusing it of an incredible 23 million breaches of anti-money laundering and counter-terrorism financing laws; not surprisingly, Australia’s second largest bank is “reviewing Austrac’s statement of claim” for what the financial crime watchdog deemed “serious and systemic non-compliance”. It is alleged that the bank failed to properly report more than 19.5 million international funds transfers, amounting to US$ 8 billion over a five-year period to 2018. Probably the most damaging revelation that came to light was that its LitePay service was used by paedophiles, without raising any red flags within the bank’s systems, to pay for child exploitation in the Philippines.

Westpac’s competitor Commonwealth Bank paid a US$ 500 million fine for similar breaches last year. The royal commission report, issued in September 2018, concluded that the abuse and misconduct within Australia’s banks and financial institutions were driven by a culture of greed.

Meanwhile, the NAB also finds itself in hot water and has agreed to pay US$ 35 million in compensation to tens of thousands of customers who were sold junk personal loan insurance and credit cards. The case was brought before the High Court by Slater, alleging the bank and its subsidiary MLC engaged in unconscionable conduct in selling consumer credit insurance (CCI) to customers, and was the first settlement of a class action taken as a result of the royal commission. The lawyers argued, successfully, that the policies were “next to worthless” to many of the customers they were sold to.

What seems to be a continuing monthly occurrence of disappointing jobs and wages data is worrying Australian economists. It is estimated that nearly 1.9 million Australians are either out of work or looking for extra work. There are very few analysts who consider that the current slackness in the labour market will suddenly tighten or that any meaningful wage growth will gain traction over the next two years. To solve the problem, the government has to take action whether it be two more rate cuts early in 2020 and/or the introduction of quantitative easing – bond buying maybe in the region of US$ 40 billion. (QE is indeed making a comeback for many global central banks.  This can be seen that the global total for net central bank assets stood at US$ 77 billion, with the figure set to rise to over US$ 1 trillion by the end of 2020). The RBA will see it as another weapon to keep rates low, liquidity up and core inflation nudging higher.

It is now expected that India’s Q3 growth will be lower than 4.5%, following a 5.0% reading the previous quarter. Any reading less than 4.2% would be the lowest since authorities adopted a new base year for GDP data in 2012. It does appear that the economy is suffering from weak global demand and ongoing tight domestic credit conditions, with most economic indicators pointing down. This situation has arisen despite five rate cuts this year (with another one, perhaps as high as 0.5%, before the end of 2019) as well as US$ 20 billion reductions in company taxes. The problem facing Finance Minister Nirmala Sitharaman is whether the slowdown has bottomed out, or there is worse to come, despite the steps already taken by the government, along with whether new investments, from the private sector, have started to materialise.

The Institute of International Finance estimates that the total of global debt will touch a massive US$ 255 trillion by the end of the year, having risen 3.1% in H1 and nearly 40% over the past decade, with little sign of a slowdown on the horizon. The debt, for which the US and China account for over 60% of the increase, now equates to 320% of global GDP and has been spurred by looser financial conditions. Non-financial sector debt – borrowing by governments, households and other businesses – accounts for $190tn, (76%) of total debt, with government debt – driven mainly by the US – expected to reach US$ 70 trillion. Global bond markets have jumped nearly a third since 2009 to US% 115 trillion, with government bonds accounting for 47% of that total and rising. With high debt burdens, 60% of the world’s countries expected to see below-potential growth next year, a global manufacturing recession, trade wars, threats of deflation and  record low rates (to try and boost borrowing), it is all but inevitable that some sort of recession is on the cards. The first thing that will happen is the bond market bubble bursting and the outcome will not be pretty.  When it comes to debt, there is no doubt that The World’s A Mess.

Set Fire To The Rain                                                                   14 November 2019

The latest launch from Azizi Developments, designed towards the younger generation, is Miraj in Dubai Studio City. The 444-unit development will house 253 studios, 155 1 B/R and 36 2 B/R apartments.  As with recent releases, the developer will be offering “affordable and flexible payment plan options.” Currently, Azizi has fifty-four on-going projects, scheduled for completion by 2023, and a further 130 projects in planning, that are projected to be delivered by 2025.

Fam Properties has closed out a US$ 173 million deal at Dubai Creek Harbour – one of the largest real estate deals recorded in Dubai in recent years. The forty-floor property, Creek Edge, located in Dubai Creek Harbour, will house 388 units and be completed in 2023.

BackLite Media has been awarded a ten-year, US$ 272 million advertising contract to transform signage in Dubai, with a mix of digital and traditional outdoor platforms across twenty-six locations along SZR. The out-of home advertising company advised that it would be utilising technology and visual solutions that are “far ahead of the systems used in global hubs across the world”. The company was responsible for introducing its distinctive unipole signs to Dubai, as far back as 1996.

Amway’s APAC Leadership Seminar 2019 will see 6.5k of its top management flying into Dubai, with Emirates, as the world’s largest direct selling business holds a meeting at DWC next month. The sixty-year US-based multi-level marketing company, with sales of US$ 8.8 billion in 2018, represents a major boost for the local MICE sector (meetings, incentives, conferencing and exhibitions) and is but one of 118 successful bids engineered by Dubai Business Events (DBE) —the emirate’s official convention bureau – that will bring in 75k overseas delegates over the course of the year. Furthermore, such events provide much needed revenue for the economy – especially in the travel, retail and hospitality sectors.

US$ 47.1 billion has been added to the assets of UAE-based conventional banks, bringing its total to US$ 670 billion, of which 19.7% is owned by the eight Shariah-compliant banks in the country, with the balance by the 59 conventional banks. The total assets of all fifty-nine banks totalled over US$ 817 billion, as deposits over the nine months grew by 3.9% to US$ 398.0 billion, although Islamic banks’ assets contracted 2.9% to US$ 154.1 billion. Retail loans totalled US$ 481.2 billion, of which 80.3% was provided by conventional banks.

Following the May launch of the government’s Golden Card scheme, 2.5k scientists and researchers, from varied academic backgrounds, have been granted permanent residency this week. HH Sheikh Mohammed bin Rashid Al Maktoum tweeted “we welcome them among us – the UAE will always be open to scientists, investors and entrepreneurs.” The Ruler’s son, Sheikh Hamdan bin Mohammed, attended the ceremony at which visas were handed out.

Dubai’s October Purchasing Managers’ Index (PMI) points to business growth in the emirate’s non-oil private sector, rising 2.0 to 54.6, driven by improving new order growth, (most notably travel and tourism firms), and higher demand. On the flip side, there was weaker growth reported in the construction and wholesale and retail sectors. Continuing price competitiveness resulted in an increase in sales activity, as selling charges reduced for the eighteenth straight month – declining at their quickest rate since February 2016. Furthermore, the rate of job growth was at its highest level in twenty-one months, with the amount of new work moving upwards.

The seventh annual State of the Global Islamic Economy survey estimates that there will be a 45% hike in Islam-inspired ethical consumption to US$ 3.2 trillion over the next four years. The UAE, along with Malaysia, Bahrain Saudi Arabia and Indonesia, continue to dominate the sector which comprises 73 countries. The survey reports on seven sectors including Islamic finance (the largest at US$ 2.5 trillion), halal food (US$ 1.4 trillion), modest fashion, pharmaceuticals, cosmetics, media/recreation and Muslim-friendly travel. Although Malaysia topped the Islamic finance and Muslim-friendly travel categories, UAE leads the field in the other five. There is no doubt that the creation of the 2014 Dubai Islamic Economy Development Centre has helped move the UAE inexorably closer to the top of the ladder.

So far this year, there has been a 2.3% decline in Q3 passenger numbers to 22.6 million, with a YTD 4.5% fall to 64.5 million, not helped by the 45-day runway closure earlier in the year and the continuing grounding of flydubai’s thirteen 737 Max jets.  The top destination remains India, with 8.8 million passengers, followed by Saudi Arabia and the UK, with numbers of 4.8 million and 4.6 million. The world’s busiest hub for long-haul flights also posted a 5.9% Q3 fall in cargo to 637k tonnes and 4.1% to 1.9 million tonnes YTD.

The UAE aviation regulator will decide when the Boeing 737 Max can return to fly once the US Federal Aviation Administration decides it is fit to return to commercial service; this is expected to be in January, ten months after two fatal crashes grounded the aircraft. The GCAA will conduct its own safety checks, in conjunction with the FAA assessment but it is expected that Max deliveries will restart next month. Boeing’s second largest customer for the 737 Max is flydubai, with a 250 aircraft order.

Last year, UAE foreign direct investment rose 8.0% to US$ 140.3 billion, boosted by government efforts to implement reforms and attract foreign capital, despite a dismal worldwide economic environment which saw a 19.0% decline in global inflows; the biggest declines were seen in the EU, developed countries and ‘transition economies’ declining 73%, 40% and 8% respectively, whilst developing countries witnessed a 3% increase. Asian countries came first in new funds introduced into the country. By H1 this year, Dubai had attracted US$ 12.7 billion – an impressive 135% increase on the same period a year earlier.

DP World continues its global expansion plans, as it announces an agreement with Namibia’s Nara Namib Free Economic Industrial Zone to establish a free zone in the country. The Dubai port operator already has an African presence in several countries, including Algeria, Egypt, Mozambique, Rwanda, Senegal and Somaliland, and sees this Walvis industry and logistics free zone as an important regional hub. The first phase, covering just 50 hectares (expandable to up to 1.5k hectares), will create 3k jobs, with an initial investment of US$ 237 million.

Trukker, a three-year old digital freight platform, has secured US$ 23 million in a Series A funding which will be utilised to expand regionally and enhance its infrastructure; currently, it operates in the UAE and Saudi Arabia, with plans to open in Egypt, Jordan and other regional countries. The online service matches hauliers (with up to 15k trucks) and its 200+ client base, allowing them to bid for jobs, as real time supply matches current demand.

Following its recent merger with Abu Dhabi Financial Group, Shuaa Capital posted a Q3 profit of US$ 6 million, with ADFG contributing profits of US$ 8 million. The merger was the result of an all-share reverse takeover deal, with the larger entity being rebranded as ‘ADFG’. In H1, Abraaj posted losses of US$ 15 million, driven by its exposure to the disgraced, and now bankrupt, Abraaj along with certain merger-related one-off costs.

 DXB Entertainments is still struggling as indicated by a Q3 loss of US$ 73 million – a marginal 2.5% improvement, compared to a year earlier; over the first nine months of the year, the loss reduced by 3.6% to US$ 195 million. Both Q3 and nine-month revenue declined by 24% to US$ 21 million and US$ 90 million, attributable to lower visitation from the resident market with visitor numbers declining by 8.2% to 1.8 million. The company behind Dubai Parks and Resorts has so far lost US$ 1.4 billion and has put strategies in place to increase the number of international visitors and reduce costs – a move that is easier said than done.

Once flying Damac Properties has had its wings trimmed and has been hit by a double whammy of declining revenue – down 42.0% to US$ 244 million – and rising costs, including a 126% hike in selling costs to US$ 73 million; the end result was that Q3 profit slumped some 78% to US$ 14 million. For the first nine months of 2019, net income was 87.8% lower at US$ 36 million, along with falls in cash/bank balances, down 20.6% to US$ 1.1 billion, and total assets sliding 2.8% to US$ 64.9 billion. Hussain Sajwani, chairman of the developer, is confident of reaching his 4k delivery target for this year.

Some analysts predict that with 21k residential units completed in H1, a further 38.4k could be finished in H2. In the unlikely event of this happening, the 2019 total would be about the same number as handed over in the past four years from 2015-2018. If there were a problem at the beginning year, that being the case, we are in for a turbulent 2020.

All of Emaar Properties’ financial indicators headed north during Q3, with a 14.0% hike in revenue to US$ 1.6 billion and profit 20.0% to the good at US$ 354 million. Over the nine-month period to 30 September, sales were 25.0% higher at US$ 3.4 billion, revenue by 1% to US$ 4.8 billion and net profit 2.0% at US$ 1.2 billion. The main drivers behind the stronger revenue stream were from foreign investors plus new, first-time home buyers entering the local property market.

Emaar Malls also recorded positive nine-month results, with 6.0% increases posted for both revenue at US$ 926 million and net profit to US$ 463 million. With a credible 92% occupancy level, it welcomed 99 million visitors to its assets – including The Dubai Mall, Dubai Marina Mall, Gold & Diamond Park, Souq Al Bahar and the Community Retail Centres. Along with Emaar Malls, its hospitality & leisure, entertainment and commercial leasing business posted a 30.0% increase in revenue to US$ 1.4 billion with its hotels’ occupancy rate at 78%. The international property development operations recorded a 22% increase in revenue to US$ 708 million, contributing 15% of the total group revenue.

Emaar Development posted an 11.0% hike in Q3 revenue to US$ 924 million, with profit 1.0% up at US$ 187 million, with selling, marketing, general and administrative expenses 63.0% higher at US$ 110 million. UAE’s largest listed property company has an impressive sales backlog of US$ 9.8 billion, which will boost revenue streams in the years ahead, driven by the launch of nineteen new residential developments, valued at US$ 2.7 billion, this year.

The bourse opened on Sunday 10 November and, having lost 85 points (3.1%) the previous two weeks, nudged 2 points higher to 2701 by 14 November 2019. Both Emaar Properties and Arabtec shed US$ 0.01. The former, having lost US$ 0.08 the previous fortnight, closed at US$ 1.13, whilst Arabtec, down US$ 0.05 the previous two weeks, traded at the end of the week on US$ 0.48. Thursday 14 November saw dismal trading of 101 million shares, worth US$ 73 million, (compared to 157 million shares, at a value of US$ 43 million, on 07 November).

By Thursday, 14 November, Brent, having gained US$ 4.42 (7.6%) the previous five weeks, shed some of those gains, down US$ 1.01 (1.6%) to US$ 61.28. Gold, having shed US$ 45 (3.7%) over the previous week, was up US$ 7 (0.4%), closing on Thursday 14 November at US$ 1,473.

On Sunday 17 November, Saudi Aramco will open its IPO to investors and, as yet, two days before the event, the size of the stake (probably 5%) and the pricing range (around US$ 1.7 billion) are yet to be revealed; it will offer as much as 0.5% of its shares to individual investors, along with a plan  to incentivise its 73k staff via a share scheme.  The 650-page prospectus confirms that the energy conglomerate will not be allowed to list further shares within six months and for the company’s owner, the Saudi government, that period is for one year after the start of trading. The final pricing will be revealed on 05 December. In a bid to boost interest ahead of the issue, Aramco has seen its taxes cut for the third time and has introduced measures to encourage investors not to sell their newly acquired shares.

Toyota Motor Corp plans a US$ 1.8 billion share buy-back, following news of a more-than-expected Q3 profit at US$ 6.1 billion (up 14.4%), driven by better global sales and a 5.6% improvement in its North American business; the profit figure beat market expectations. It saw quarterly vehicle sales 26.1% higher at 2.75 million. By the end of March, the carmaker is planning a 34 million share buy-back, costing US$ 1.8 billion, with rival Honda also in buy-back mode paying US$ 915 million. However, the company has had a tough time and has cut its annual profit forecast by 10.4% to US$ 6.3 billion, (and revenue by 3.8% to US$ 71.7 billion), as global vehicle demand remains moribund and specific supply issues continue. Quarterly profit came in on US$ 2.0 billion.

Nissan posted disappointing Q2 (ending 30 September) results, with declines in both revenue – down 7.0% to US$ 24 billion – and profit by 54.6% to US$ 541 million. The main drivers include falling global vehicle sales and the loss of confidence in the brand power, following the arrest of its former chairman Carlos Ghosn; he faces various allegations, including under-reporting promised compensation in documents and breaching trust in making dubious payments. The car maker has started to improve much-needed governance, corporate culture and ethical standards which, in turn, will result in additional costs at least in the short-term.

As part of its strategy to cut costs by up to US$ 1 billion by 2022, Mercedes-Benz is to shed 1k jobs. The German company is not the only carmaker facing costly challenges from new, tougher emissions targets.  Not only do the new CO2 targets require high investment but costs fly north when it comes to investing in plug-in hybrids and all-electric cars.

After a two-year agreement, Nike has decided to invest in “distinctive” partnerships with other retailers and platforms, as it stops using Amazon as a vehicle for selling directly to customers. The trial seems to have convinced the sportswear giant that it should seek greater control of its brand and ensure that it deals more directly with its customer base, by investing in strong, distinctive partnerships with other retailers and platforms.

Following the lead of its tech competitors, including Amazon, Apple, Facebook and Uber, Google is set to announce a new financial product for users. The service, launched via Google Pay, will utilise the expertise of banks and credit unions in the US to offer “smart checking” accounts; users will be able to add Google’s analytic tools to traditional banking products. Google has teamed up with Marcus, (Goldman Sachs’ new consumer arm), as part of its Apple Pay and Wallet service. There is no doubt that US regulators will take a close look at Apple’s entrée into this new market segment, with all the tech giants already facing probes related to competition, data protection and privacy.

The co-founder of the Nusr-Et steakhouse, Nusret Gokce, and the other co-owners, Mithat Erdem and billionaire Ferit Sahenk, are considering selling a stake in the business, known as Salt-Bae.  As a stand-alone entity, Nusr-Et could be worth up to US$ 1 billion and undoubtedly, if a part sale occurs, much interest would be generated. The three also operate steakhouses and burger joints in New York, Miami, Dubai and on the Greek island of Mykonos. Sahenk, a 51% shareholder, as well as a real estate developer, has struggled, in line with the fall in the Turkish lire and having a US$ 2.5 billion of debt to be repaid; he has been divesting stakes in hotels and restaurants and could be a likely part-seller.

Although Vodafone shipped US$ 2.7 billion in H1 losses, it was a major improvement on the US$ 10 billion+ deficit posted over the same period last year. The dismal reading was brought about mainly by “a loss at Vodafone Idea, following an adverse legal judgement against the industry by the (Indian) Supreme Court, partially offset by a profit on the disposal of Vodafone New Zealand.” If these items had been taken out of the equation, the UK telecom would have showed a positive operating profit. Last month, Vodafone was one of several beleaguered Indian telecoms companies ordered by the courts to pay a total of US$ 13 billion in unpaid bills.

There has been an offer from private equity group KKR to buy out Boots’ parent company, Walgreens Boots Alliance, which, if successful, would be the biggest ever of its kind. Whether the current time is best suited to such a deal remains to be seen. Only three years ago, the private equity group sold its final shares in Walgreens which, although it has an estimated market value of around US$ 56 billion, is US$ 17 billion in debt. Operating in twenty-five countries, it is currently trying to save US$ 2 billion a year and has indicated that it would close 200 UK outlets. Prior to the latest news, its share value had dipped over 20% YTD.

It is no surprise to see that a disgruntled shareholder has taken WeWork to court over the US$ 1.7 billion leaving package approved for ousted co-founder Adam Neumann. Although the company called the claims “meritless”, there would be many who would agree that this sum is “beyond comprehension” and is “improper”. It was only two months ago that the company, that had previously been valued around US$ 50 billion, saw a stock market floatation collapse in disarray, with latest valuations coming in at a lot less than US$ 10 billion.

A growing problem in Australia (and probably the same in many other countries including the UAE), is that of so-called payday loans. A local study estimates that 1.8 million households there have taken out 4.7 million such loans over the past three years. There is increased concern that those taking out payday loans were “those doing it toughest in society” and were easy pickings for the “predatory” practices of lenders. Evidently, 41% of female borrowers are single mothers, with women accounting for 23% of borrowers, the number having risen 62.1% to 287k over the past three years. In 2016, the federal government announced plans to tighten laws around small consumer loans and leases but, in true Ozzie style, no progress has been made in the ensuing three years, so that the financial vultures are still charging exorbitant rates, whilst making mainly the poorer even poorer.

The Australian Big 4 banks’ woes continue with both CBA and Westpac hauled before regulators, denying charges that they levy a so-called loyalty tax, forcing existing mortgage customers onto higher interest rates to fund lower rates for new customers. It seems that CBA dispute the concept of a loyalty tax, arguing different loan rates reflect supply and demand for mortgages over time and that the bank did not discriminate between “old” and “new” clients. Westpac indicated that competition would be destroyed if all loans were at the same price. Another area of concern was the fact that none of the banks have passed on the full benefit of recent rate cuts and are being accused of profiteering at the expense of millions of home loan customers.

There are further signs of continuing weakness in Australian workers’ wage growth, as average pay packets have only risen 2.2% on the year – below long-term expansion rates. The latest quarterly 0.5% rise, down from 0.6% the previous period, will probably see interest rates cut again. Public sector growth, at 2.5%, came in at a faster rate than the private sector’s 2.2%. but returns were expected to be higher as during the quarter, new enterprise bargaining agreements (EBAs) were introduced plus the Fair Work Commission’s annual wage review. The situation was not made any better with Australia’s October unemployment rate jumping back to 5.3%, with the number of unemployed at 726k.

China produces about 22% of global cotton supplies and the Xinjiang region (with 84% of that total) is the focus of Chinese cotton production; the region has been in the news with allegations of its Uighur minority being persecuted and recruited for forced labour. Now there is increasing pressure on the many global brands that directly or – more probably – indirectly source cotton products from there to boycott the region. It is reported that the likes of H&M, Esprit and Adidas, along with Japan’s Muji and Uniqlo, are at the end of supply chains from the Chinese region.

Monday 11 November saw Singles Day (11/11), an annual event, that is the world’s busiest online shopping day, adopted by Jack Ma’s Alibaba, and has now become a marketing tool not only in China but also in other Asian countries. In the first eighteen hours of the day, Alibaba had surpassed last year’s total, with a 25.2% increase, to reach US$ 38.3 billion, with rival JD.com posting sales of US$ 25.6 billion by mid-afternoon.  Alibaba’s normal daily sales average US$ 2.3 billion and Ma had expected a bigger number this year, blaming the fact that it fell on a Monday and the weather was too hot. There is no doubt that China is one of the most “switched-on” counties in the world with 85% of the population using the internet for everyday use, including payments, driven by a lack of traditional retailing networks. Many of the country’s richest entrepreneurs owe their wealth to e-commerce including the likes of Jack Ma, Colin Huang (Pinduoduo), Zhang Jindong (Sunng) and Richard Liu (JD Com).

With Q3 growth of 0.3%, the UK economy managed to avoid recession, following an 0.2% contraction in the previous quarter. (The technical definition of a recession is two straight quarters of negative growth). The main driver behind the uptick was the services sector, with help from an improved construction contribution; production was flat and the manufacturing sector continued to fall in most industries except car production. On an annualised basis, the 1.0% reading is the weakest such quarter in nearly a decade and the outlook is more of the same.

As October UK inflation rates nudged lower by 0.2% to 1.5% – its slowest pace in three years – it seems that this could be a third factor to swing the BoE into cutting interest rates again; the other two, Brexit uncertainty and slowdown in the global economy, in themselves are strong indicators for further cuts. The good news is that there could be a boost in household spending, with wages rising at a faster rate (3.6%) than inflation. With lower energy prices -gas and electricity 8.7% and 2.2% lower month on month – there is every possibility that it could go as low as 1.2%, before climbing back to reach the BoE’s 2.0% target, and more, by the end of 2020.

Winter came with a vengeance after a long, hot and never-ending summer saw Dubai hit by heavy rains and storms on Sunday, leading to localised flooding, huge traffic jams, some property damage and minor disruptions at Dubai International. Notwithstanding the usual suspects, motorists heeded warnings to take extra care and avoid unnecessary trips outside. The week has seen Venice and parts of England reeling from floods, whilst the east coast of Australia and the US west coast of US have witnessed catastrophic fires. These events have been happening for ages and were seen as natural and expected occurrences; the problem is that the world has become more aware and that it appears that they are increasing in their severity. In 2019, this should not be happening. Set Fire To The Rain.

A Change Is Gonna Come                                                                   07 November 2019

There could be a welcome boost for the local real estate sector with reports that the Central Bank is considering new rules that will loosen the cap on bank lending; currently, it is 20% of customer deposits that can be lent to the property industry. Any amount above the 20% threshold will incur a capital charge but any loosening is bound to have a positive impact. If it were to go through, banks will have to be cautious, bearing in mind that latest Q3 figures show that UAE banks’ non-performing loans stood at 6.4%, compared to 5.7% a year earlier.

In a bid to accelerate construction at its four-phased residential mega project, Riviera in MBR City, Azizi Developments has added a total of 6k workers to its payroll, as its own Year of Construction, (dedicated to the swift construction of its ongoing projects), rolls to an end. This massive project encompasses 16k residences spread across 71 mid-rise buildings. The developer estimates that phases 1, 2 and 3 are 54%, 36% and 22% completed.

According to Knight Frank, average office rents have declined 8.2% over the past twelve months, with citywide office rents down 9.2% to US$ 30 per sq ft per year. The main driver continues to be lower demand in line with reduced business confidence, as the local economy reports 2019 growth of 1.9%, compared to 3.1% a year earlier.

A US$ 102 million infrastructure project, that involved construction work on 1.4 km of tunnels and 7 km of roads, leading to the Jewel of the Creek development, has been completed. The ground and basement access points of the Jewel of the Creek project have been linked with Baniyas Street to the north, and Al Ittihad Street to the east. An 80 mt footbridge over Baniyas Street, along with other work including lighting, will be completed by the end of Q1 2020. The mega 126k sq mt development encompasses 756 serviced apartments (in four towers), three hotels with 1.2k rooms, twenty restaurants, a man-made lake, and a waterfront promenade and marina for 65 berths; it will also have parking for 6k vehicles.

One tyre manufacturer is introducing a new concept to Dubai by introducing its Pirelli Tyre Hotel, located close to Dubai Autodrome. The temperature-controlled facility, allowing drivers to store their premium tyres to optimise performance, is fitted with custom-designed racks made to enhance the longevity of such tyres. The emirate becomes its fourth location in the world, following Munich, Monte Carlo and Los Angeles.

The Department of Tourism and Commerce Marketing (Dubai Tourism) has tied up with Tencent Games to develop The Map, featuring Dubai within the successful online game application. Lego Cube is free to download and allows players to experience many of Dubai’s landmarks; the aim of the exercise is to attract more Chinese tourists and is the first time that TenCent has partnered with an oversees entity.

With the start of the cruise season, Dubai is expecting to welcome up to one million visitors on over 200 ship calls – last season saw a 51% increase in numbers to 850k, arriving on 152 liners. The first ship arrived last month at Dubai’s Mina Rashid Cruise Terminal. – TUI Cruises’ Mein Schiff 5, carrying 6k passengers.

Monopoly has finally arrived in Dubai and was launched at a ceremony at the Burj Al Arab on Monday. The iconic hotel is one of the places on the board that includes iconic Dubai sights such as Burj Khalifa, The Dubai Mall, Atlantis The Palm, Dubai Frame, Dubai Opera and Global Village. Surprisingly, Nord Anglia International School was featured, whilst the likes of The Dubai Mall and Palm Jumeirah did not pass ‘Go’. The two top positions were taken by the Burj Al Arab and Bluewaters.

Kibsons has expanded its 130k sq ft head office and cold storage warehouse in Dubai Fruit and Vegetable Market and has plans to quadruple its daily home deliveries to 10k.; its work force will increase by a further 200. The family-owned 38-year old online fruit, vegetable, dairy and meat distributor will also triple its distribution capacity, both distribution capacity of fresh produce, which currently stands at more than 250k kg, and also its meat processing capabilities. The company plans to expand into other parts of the region before the end of 2021.

There have been calls from some operators in Dubai’s hospitality sector for a review of taxation on adult beverages, served in bars and restaurants, claiming that the current tax on adult beverages is having a negative impact on a struggling industry and perhaps hurting tourism numbers.

An NBK report on the UAE sees its growth prospects remain “relatively solid”, backed up by 3.5% 2019 hike increase in the oil sector this year, leading to a modest average 2.2% expansion over the three years to 2022. It estimates that this year’s growth in the non-oil sector will be 1.0%, almost doubling next year to 1.8%, boosted by “the impact of structural reforms, the fiscal stimulus package and the Expo 2020 begin to be realised”. Going forward, the economy is expected to weaken to 1.5%, as the impact of the Abu Dhabi stimulus and Expo 2020 eases. With property rentals still heading south, it is expected that there will be 1.9% deflation this year, but this is a short-term feature with inflation returning to “normal” levels of around 2.4% by 2022.

There was even more bullish news from the IMF espousing that the UAE’s non-oil growth would exceed 1% this year and rise to 3% in 2020 – at the fastest rate since 2016. The UAE GDP will reach 2.5% in 2020., helped by Expo 2020 and UAE government policies. The world body noted that the economy has been helped by the government taking “a number of important steps”, including allowing 100% foreign ownership in certain sectors, reducing fees/penalties, a new insolvency framework and the promotion of greater financial inclusion.

According to a Ministry of Finance official, the UAE has no plans to introduce income tax and the country will not see any VAT hikes for at least another three years. This is welcome news for many and comes on the back of increasing rumours that VAT would double to 10% and that income tax was just around the corner. There are some analysts who think that any future tax will be forced on the government by outside bodies such as the World Bank or IMF. Initial estimates made when VAT was introduced to the UAE in January 2017 were for revenues of US$ 3.3 billion; the first year of operations saw the actual figure more than double to US$ 7.4 billion.

Despite all the doom and gloom hanging around the economy, the Ministry of Human Resources and Emiratisation indicated that Dubai added 90.3k net new jobs in the year to June – up 21.9% on the previous year.

The GITEX Technology Week Economic Impact Assessment highlighted revenue across direct, (spending in ancillary sectors such as accommodation, F&B, retail, entertainment, travel), indirect and induced economic levers, (including higher employment and consequent disposal income growth); this equated to US$ 250 million being  added to the emirate’s GDP.

Landmark Group has launched e-commerce apps for iPhone and Android and an e-commerce website for its Centrepoint brand in Kuwait, an e-commerce market expected to grow to US$ 1.1 billion by the end of 2020. The Dubai-based retail and hospitality conglomerate expects that with a population of 2.6 million internet users, of which over 92% already shop online, will be a lucrative market. Kuwait customers will have instant access to over 25k product lines from its range, including Babyshop, Splash, Lifestyle and Shoemart, and be able to shop for over 200 homegrown and international brands. Landmark has had over seven years in the e-commerce sector and has witnessed exponential compound annual growth of 140%.

It seems inevitable that 2019 will see new record highs for the Dubai Gold and Commodities Exchange, as after nine months of trading, it has posted 20.3 million contracts (valued at US$ 373 billion); its twelve-month total in 2018 was 22.3 million. Last month, its daily trading was at 72.9k and its monthly total of 1.68 million deals was 11.5% higher than a year earlier. Gold Futures showed a YTD 70% jump in trades as both INR Quanto Futures (116% higher on the year) and Brent Crude Oil Futures, up 38%, were notable performers.

DP World’s expansion plans seem never-ending, with the latest being a 34-year concession (with French container operator Terminal Link – PortSynergy Group) to run two berths in Le Havre; the world’s largest port operator already has operations in berth 5 in the French port. Once completed, this addition will add one million TEUs (20’ Equivalent Units) to its portfolio and will cover an area of 42 hectare, with a 700 mt quay.

As the much-troubled Drake & Scull continues to restructure its business, it is also still investigating the actions of its previous management; Shuaa Capital is assisting to “support our restructuring, to transform DSI and bring it back to profitability”. The current chairman, Shafiq Abdelhamid, commented “it is our duty to protect the rights of our shareholders who trusted us and invested in this company.” The contracting firm has already lodged fifteen complaints against former company board members and executive management, with further criminal complaints having been added. The company now claims that between 2009-2017, annual losses were hidden from shareholders. In 2015, DSI posted a US$ 256 million loss, rising to US$ 378 million two years later, by which time retained losses had risen to US$ 858 million. Its shares were suspended on the DFM in November 2018.

The region’s biggest aviation lessor, state-owned Dubai Aerospace Enterprise, posted a 10.3% decline in nine-month profit to US$ 260.5 million, driven by marked increases in depreciation, increasing by US$ 12 million, and finance costs grew. 12.0% to US$ 281 million. In September, the company received a mandate from an unnamed investor to acquire and manage aircraft worth about US$ 1.4 billion. As at 30 September, the lessor had a fleet of 358 aircraft (84% owned, with the balance managed planes) with 111 customers in 56 countries; the book value of its owned planes is US$ 11.9 billion. Emirates is the company’s largest customer, contributing 14.1% of lease revenue during the nine-month period – its other four top lessees accounted for a further 14.5% of the revenue stream.

Meanwhile, Emirates saw its H1 profits (to 30 September) 382% higher to US$ 235 million, despite a 3.0% decline in revenue at US$ 12.9 billion; the main drivers were a US$ 545 million fall in oil prices, offset by a US$ 320 million exchange loss and a 45-day closure of the southern runway earlier in the year. However, there are still a few canaries in the mine, including an uncertain and slowing global economic environment, socio-political problems in certain locations of the airline’s market and increasing competition, biting into margins Consequently, the airline has decreased capacity and rationalised routes, whilst expecting “flattened” growth going forward. During H1, there was a 2% fall in the number of passengers carried to 29.6 million, as capacity was reduced by 5% due to the runway closure; however, passenger yields and passenger seat factor both headed north – up 1% and by 2.3% to 81.1% respectively.

Dnata – its airport and travel services arm – saw revenue dip 2% to US$ 14.5 billion, with an 8.0% profit decline at US$ 327 million, partly due to its exposure to the UK’s bankrupt tour operator, Thomas Cook; to date, there has been a US$ 23 million impairment cost. Dnata posted a 64% decline in profits to US$ 85 million.

In line with global trends, freight volumes at the world’s largest international cargo airline fell 8.0% to 1.2 million tonnes and yields by 3.0%. (In September, IATA reported that global air freight had fallen 4.5% – the 11th consecutive month of decline in freight volumes and the longest period since the 2008 GFC). With ongoing trade tensions, and the US/Chinese tariff war, conditions are not expected to improve in the short-term.

This week the Emirates chairman, Sheikh Ahmed bin Saeed Al Maktoum, has been requested to temporarily oversee Dubai Holding and Meraas, replacing Abdulla Al Habbai, who had been in charge of both government entitles since March 2017; during that time, he launched several projects, most notably Downtown Jumeirah and Madinat Jumeirah Living. His Highness will assume further responsibility for some of Dubai’s most important entities with Dubai Holding, owning the likes of the Jumeriah Group, Tecom, Dubai Properties, Dubai Asset Management and Arab Media Group; it is estimated it has 20k employees and an asset value of US$ 35.4 billion. Meraas has recently agreed a US$ 1.4 billion retail JV with Canada’s Brookfield Asset Management and is responsible for some of the emirate’s major developments including Bluewaters Island, City Walk, La Mer and The Beach.

Furthermore, Sheikh Ahmed is also Second Deputy Chairman of The Executive Council of Dubai, president of Dubai Civil Aviation Authority, chairman of Dubai Airports and chairman of Dubai World.

Although its property income rose 4.0%, to US$ 54 million, for the nine months to 30 September, Equitativa’s posted an 81.0% decline in profit to US$ 6 million. The fund manager, that runs the Nasdaq Dubai-listed Emirates Reit, is now looking at reducing costs and focusing on operational improvements. Results were not helped by a US$ 1 million revaluation loss, “influenced by market conditions”, compared to a US$ 20 million gain posted in the same period last year.  The company’s portfolio stands at US$ 1 billion and, although its net assets per share is at US$ 1.67, its latest market value of US$ 0.66 shows trading at a substantial discount.

Amanat halved its losses to US$ 463k in Q3, whilst operating revenue more than quintupled to over US$ 4 million, with finance income 24% higher at just under US$ 3 million. Over the nine-month period, profit was 38% up at US$ 9 million on revenue totalling US$ 24 million, with operating income almost five times higher at US$ 6 million. Two of its assets, Middlesex University Dubai and North London Collegiate Schools, performed well with revenue streams of US$ 5 million and US$ 6 million respectively.

Emaar Malls reported a 6.0% hike in profits for the nine months to 30 September to US$ 472 million on the back of a 5.6% revenue increase to US$ 929 million. On a quarterly basis, both profit and revenue headed north by 12.1% to US$ 164 million and 5.4% to US$ 323 million respectively. Its wholly owned on-line subsidiary also posted positive results, with nine-month revenue 14.0% up at US$ 188 million, with Q3 figures 19.7% higher at US$ 73 million. Its flagship, Dubai Mall, welcomed 61 million visitors out of the 99 million that shopped at all their malls over the nine months, whilst Q3 occupancy levels remained at a credible 92%.

The bourse opened on Sunday 03 November and, having lost 39 points (1.4%) the previous week, shed 46 points (1.7%) to 2699 by 07 November 2019. Emaar Properties, having lost US$ 0.06 the previous week shed a further US$ 0.02 to close at US$ 1.14, whilst Arabtec, down US$ 0.04 the previous week, was US$ 0.01 lower to US$ 0.49. Thursday 07 November saw dismal trading of 125 million shares, worth US$ 65 million, (compared to 157 million shares, at a value of US$ 43 million, on 31 October).

By Thursday, 07 November, Brent, having gained US$ 3.72 (6.4%) the previous four weeks, continued in positive territory, up US$ 0.70 (1.0%) to US$ 62.29. Gold, having gained US$ 20 (0.5%) over the previous fortnight, lost that and more, down US$ 45 (3.7%), closing on Thursday 07 November at US$ 1,466. 

Ahead of a partial IPO, Saudi Aramco’s nine-month profit dipped 18.0% to US$ 68.2 billion, as revenue slipped 6.9% to US$ 217.0 billion on the back of lower energy prices – with average Brent crude declining by 11.0% over the same period. Despite the fall, these figures are still way ahead of the total 2018 profit of the most profitable global publicly traded company.

Meanwhile Sunday saw the start of the company’s IPO – with potential tax cuts and dividends to lure investors – that will probably value the energy giant at a lot less than the touted US$ 2 trillion only three months ago. Sixteen banks have offered valuation guidance, ranging from US$ 1.1 trillion to US$ 2.5 trillion – it looks as if the final decision may result from a toss of a coin.

An industry report intimated that there was a massive 22.9% Q3 jump in mobile consumer spend on the Apple App Store and the Google Play Store, to US$ 21.9 billion. Of the world’s two largest distribution channels, App stores earned more than 60% of that total (US$ 14.2 billion) with Google Play, supported by Android devices, lagging some US$ 6.5 billion behind in earnings; however, Google Play does have a larger number of apps in its library (2.47 million) compared to the 1.8 million held by its rival. Interestingly, whilst App Store posted a 5.3% growth in first-time app installations, with its main rival almost tripling their number in Q3.  The total number of apps being downloaded is expected to grow by 26.8% to 260 billion over the next three years.

It seems highly likely that Jingye Group will buy British Steel out of insolvency, after initial frontrunner, Turkey’s Ataer pulled out late in October. The utility, currently being run by the UK government since May, employs 5k in its Scunthorpe plant, with a further 20k in the supply chain. The chairman of the Chinese steelmaker, Li Ganpo, visited British steel sites last week and held discussions with Scunthorpe MP Nic Dakin and Andrew Percy, representative for the Brigg and Goole constituency.

After 58 years of trading, and unable to find a buyer, Mothercare has announced plans to put its UK business into administration, with the loss of a possible 2.5k jobs.  Its overseas business remains intact, with countries such as India, Indonesia and Russia not subject to administration.  In line with many of its peers, the retailer has been struggling from increased competition, including the big UK supermarkets, fast fashion brands and the internet.

Under Armour is being investigated by US federal authorities for accounting irregularities, including shifting sales from quarter to quarter to appear healthier; the company, which has been struggling with staling growth, has been under investigation since 2017. When the news broke this week, along with Q3 results showing a 1.0% decline in sales to US$ 1.4 billion, its shares slumped 16%.

Yet again, both the S&P 500 and Dow Jones indices hit record highs after opening up about 0.3% each on Thursday, with the Nasdaq up 0.5%, following reports that both China and the US would rollback tariffs in phases. Whilst discussions are taking place, both parties have agreed to cancel further tariffs in different phases. However, it seems that a November meeting between President Donald Trump and Chinese President Xi Jinping could be delayed a month.

Judgement Day may have finally arrived for the Big 4 Australian banks – ANZ, CBA, NAB and Westapc – with all of them posting lower annual profits. The last one to post results was NAB whose profits have declined 13.6% to US$ 3.3 billion. A KPMG report shows that that these four banks saw their combined cash profits, for the year ending 30 June 20 19, 7.8%  lower compared to a year earlier. What is sure is the banks have to change from their previous past poor, oft illegal and unethical behaviour and that they will have to introduce new processes which will take years to actually fully implement: this will impede further revenue (and profit) growth. In addition, it is inevitable that all will be in line for heavy penalties for their previous “misdeeds”. and higher costs as new processes are introduced. They also face the double whammy of shrinking margins in a low-interest-rate environment.

The Australian retail sector is going through tough times, with one analyst stating that the September figures were “the weakest retail spending in 28 years” and this despite the fact that 60% of tax refunds had been processed and in the hands of consumers. YTD retail volumes are 0.2% lower, as there have been three 0.1% quarterly declines over the past twelve months. The last time volumes fell on an annual basis was in the early 1990s – the last time Australia experienced a recession. There is no doubt that consumers are cutting back on spending, despite successive interest rate and tax cuts but low wage growth is another problem. However, what is most worrying for the macro economy is that consumer spending accounts for 67% of the country’s economic activity and this will not help the lucky country from slipping into recession.

October 2019 could be the month that the Dubai property market finally moved off its four-year bottom. It is reported that last month witnessed 4.8k sales of land, residential and commercial properties – its highest monthly number since January 2008. It is estimated that by July 2019, villa/apartment prices had declined by 12% over the previous two years and were 4% down on December 2018 prices. The sales jump has been driven by several factors, apart from the fact that all cycles have to change and go through ups and downs – and now may be the time to head north. With the help of banks being forced to remove the 3% early settlement fee, a change in maximum age requirements and lower prices, among other factors, the market dynamics are finally starting to shift. A Change Is Gonna Come.

Turning Japanese                                                                               31 October 2019

Danube Properties is to launch a US$ 409 million residential community— its biggest ever project— comprising over 2k homes, with unit prices starting US$ 79k to US$ 327k for a 3 B/R property. Its launch will take place before year-end and will be completed by 2023. This would be the biggest development this year by any private company, at a time when there are some in the industry, such Hussain Sajwani, who advocate a freeze on new developments for up two years; there are others who hold back sales until the project has gone past the 70% stage of build.  Danube is selling at launch date and they seem to be announcing that for them at least, it is business as usual, with their sales plan backed with its innovative 1% monthly payments.

Following comments from Damac’s founder Hussain Sajwani that all new home constructions should be halted for eighteen months, and that the main culprit for the current property over-supply was Emaar, its chairman, Mohammed Alabbar, retorted “Maybe if your Q2 profits were down by nearly 90 percent, it’s difficult to focus. I know what I am focused on, which is delivering the results Emaar customers and shareholders expect.” Damac’s Q2 results showed that the developer had seen slumps in both its revenue and profit streams – by 46% to US$ 264 million and 87% to US$ 14 million; over the same quarter, Emaar posted sales of US$ 965 million.

Damac’s founder was also in the news as he finally acquired troubled Italian fashion house Roberto Cavalli, via his Dubai-based Vision Investment Company; this follows a Milan court approval of a debt restructuring agreement. Earlier in the year, when the company filed for bankruptcy in Italy and the US and closed all of its American stores, reports put its value at US$ 179 million. There were several high-profile companies in the bidding, including US-based Marquee Brands, Bluestar Alliance and Only the Brave. Two years ago, the two companies had signed a deal to build a number of “Just Cavalli” villas in Dubai and another one to provide the interior design for at least five luxury hotels.

The opening of the new Address Sky View Hotel in Downtown Dubai should open tomorrow, 01 November, but this has been delayed so as to complete the finishing touches to the twin tower structure, with 169 hotel rooms and 551 apartments. The property is distinguishable by its a floating sky bridge, connecting the two structures, and a 70 mt long infinity pool located 220 mt above ground level. For the adventurous, it also boasts a glass slide which takes guests down, outside, from the 53rd floor to the Sky Views observation deck, as well as an adventure walk (with a harness) on the outside of the structure.

MAF is to open seven Carrefour stores in Uzbekistan over the next two years, becoming the first international grocery retailer to enter that country’s market. The Dubai-based conglomerate, which holds the exclusive rights to operate Carrefour in 31 countries in Mena and Central Asia, currently operates 285 stores in fifteen countries; it hopes to double that number by 2023.  H1 figures for MAF’s retail arm posted a 1% rise in profit to US$ 4.0 billion.

Majid Al Futtaim has refuted reports that it owes any money to Will.i.am’s tech company i.am+  and that it has yet to fill its financial obligations to the US firm with regards to a partnership to build a firm the size of Amazon in the UAE. In February, a deal between the two parties was signed to bring its Omega technology to MENA customers and to build a firm the size of Amazon in the UAE, and that the lack of funds has been the cause for the nine-month delay since then. The Dubai-based retail giant indicated that it had fulfilled all its financial commitments to date. US reports show that US federal government had filed a lien showing i.am+ owes US$ 1.8 million in delinquent taxes and interest.

Sheikh Ahmed bin Saeed Al Maktoum, chairman of both Emirates and flydubai, has commended the two-year partnership between the two airlines saying “the strategic partnership has been a success, generating benefits for travellers, for both airlines, and for Dubai.” During the two year, the partnership has carried 5.3 million passengers and having initially started with codeshare arrangements, now share more routes, schedules and airport operations. It is a win-win situation for both parties using Dubai as a hub, Emirates’ passengers can connect to 94 destinations on the flydubai network whilst flydubai passengers can access 143 Emirates locations.

There was good news for Emirates this week with a Mexican court ruling that the airline could commence flying to the country (via a ‘fifth freedom’ flight from Barcelona) starting in December. The case – brought by Aeromexico – is still on-going, with the judge agreeing that the local carrier can appeal the verdict. The bilateral air services agreement was signed by both countries in July.

Dubai ports operator DP World has put its UK expansion plans on hold due to uncertainties over Brexit, having already invested upwards of US$ 1.9 billion in the country; most of the investment has been made in the London Gateway port and logistics park.

For the third consecutive month, fuel prices will go down in November, as set by the Fuel Price Committee. Special 95 will be US$ 0.008 lower (1.4%) at US$ 0.569 per litre.

Work has started on phase 1 of Emirates Central Cooling Systems Corporation’s construction for its new US$ 52 million plant in Dubai Production City. Empower expect this phase to be completed within twelve months and when the final and when finished, it will add 47k Refrigeration Tonnes to its capacity. The company currently provides district cooling services to more than 1.1k buildings, comprising more than 100k customers.

A meeting of the Council of Ministers approved the country’s 2020 US$ 16.5 billion deficit-free budget. The budget covers three main sectors – social development, government affairs and infrastructure/economic resources/living benefits – all allocated roughly a third of the total.

Du saw its Q3 profit level (after royalty payments) decline by 13.5% to US$ 104 million, as revenue dipped 7.9% to US$ 817 million. Over the period, mobile subscriptions dropped 10.6% to 7.7 million, although fixed-line customers grew 1.5% to 771k. Over the nine-month period to 30 September, the telecom posted a 7.9% fall in like-for like profit after royalty to US$ 351 million, with revenue 6.2% shy at US$ 2.6 billion. Capex, at US$ 218 million, was 82.0% up on the corresponding period in 2018.

The bourse opened on Sunday 27 October and, having nudged 4 points higher the previous week, shed 39 points (1.4%) to 2745 by 31 October 2019. Emaar Properties, having gained US$ 0.01 the previous week lost US$ 0.06 to close at US$ 1.16, whilst Arabtec was US$ 0.04 lower to US$ 0.50. Thursday 31 October saw lower trading of 157 million shares, worth US$ 43 million, (compared to 219 million shares, at a value of US$ 50 million on 24 October). For the month of October, Emaar, having opened the month on US$ 1.26, closed US$ 0.10. lower on US$ 1.16, with Arabtec US$ 0.02 higher from its opening of US$ 0.48.

By Thursday, 31 October, Brent, having gained US$ 3.52 (6.1%) the previous three weeks, kept in positive territory, up US$ 0.20 (0.3%) to US$ 61.59. Gold, having gained US$ 7 (0.5%) over the previous week, was up US$ 13 (0.9%), closing on Thursday 31 October at US$ 1,511.  For the month of October, both commodities were up – Brent from month openings of US$ 60.68 and the yellow metal from US$ 1473.

Thanks to an almost 25% lift in sales to China Jaguar Land Rover posted a quarterly profit of US$ 200 million, with revenues climbing 8.0% to US$ 7.6 billion. Sales of JLR’s new Range Rover Evoque were almost 50% higher and the improved returns helped to reduce its parent company’s losses with Tata Motors posting a Q3 79.3% reduction to US$ 31 million.

Australian regulators have taken to the courts, alleging that Google has been misleading consumers about the personal data it collects, uses and keeps. The ACCC, in a world first action against the tech giant, is seeking fines and compliance orders against Google, which has a US$ 880 billion market value, in a crackdown on digital platform disclosures.

To the surprise of some, Microsoft has been awarded a ten-year, US$ 10 billion Pentagon contract to replace its ageing computer networks with a single cloud system; Jedi (Joint Enterprise Defence Infrastructure) will bring the US defence department right up to date with its technology and give the military better and quicker access to data. Oracle and IBM were also involved in the process, along with Amazon who for some time were favourites to win the bid. However, in July, President Trump, who has had his run-ins with Amazon founder Jeff Bezos, questioned the integrity of the contract process indicating that other companies had told him that the contract “wasn’t competitively bid” and that his administration would “take a very long look” at the deal. Other parties seemed to side with the President claiming that the bidding process had been rigged to favour Amazon, the world’s biggest provider of cloud-computing services.

Although Alphabet’s Q3 revenue was 20% up on last year at US$ 40.5 billion, its profit slumped over 23% to US$ 7.1 billion, as the internet search leader continued to pump money into R&D for artificial intelligence (25% higher at US$ 6.6 billion), cloud infrastructure  and new Pixels smartphones;  sales and marketing expenses were also higher – up 20% at US$ 4.6 billion. The tech firm has seen its tax provision almost double its effective tax rate to US$ 1.6 billion, equating to 18%.

It seems that LVMH may bid up to US$ 14.5 billion for jeweller Tiffany & Co on a possible takeover; the offer price is 22% higher than its 25 October closing price. The French company, that owns the Bulgari jewel and watch brand, Sephora cosmetics stores, Hublot watches and Dom Perignon Champagne, is looking for extra penetration in the jewellery sector. If the sale were to go through, it would help LVMH compete against companies such as Swiss rival Richemont SA, the owner of Cartier and Van Cleef & Arpels.  On the news, both companies’ shares were up – LVMH by 1% with Tiffany jumping by 22%.

HSBC’s Q3 pretax profit fell 12% to US$ 5.3 billion., missing market estimates; 90% of that total emanated from Asian operations. Global banking and markets reported a 30% decline to over US$ 1.2 billion, while retail banking and wealth management saw an 18% drop to US$ 1.7 billion. The bank estimates that it will spend US$ 17 billion updating its technology platforms and expanding its business in mainland China. The new management realised that some of its business units needed to change and that there was an urgent need to accelerate plans to remodel them and move capital into higher growth. The bank will try to sell its French retail bank and exit stock trading in some developed Western markets.

In the wake of its banking scandal, Australian regulators are looking at banning the big audit firms doing both auditing and consultancy works for clients. It was noted that auditors avoided scrutiny at the royal banking commission, despite being a significant part of the problem. There is no doubt that public confidence in the profession is at a low ebb and it is time for a wakeup call to confront concerns about independence and conflicts of interest. The country’s second auditing profession, Chartered Accountants Australia and New Zealand (CAANZ), wants to “clarify and strengthen” prohibitions on audit firms providing often-lucrative consulting services to companies they audit. Better late than never.

After two tumultuous weeks of unprecedented nationwide protests, that have crippled Lebanon, Saad Hariri announced he was submitting the resignation of his government. The prime minister’s decision “in response to the will of many Lebanese who took to the streets to demand change” was inevitable after tension mounted between protesters and security forces. There is no doubt that the populace has grown tired of incompetent and corrupt politicians who have brought the country to economic chaos, with networks of cronyism, patronage and nepotism depleting the treasury and gutting public services.

It is hoped that a change in government may placate protestors at a time when the economy was “days” from collapse. Such a move may restore business confidence and ensure that banks reopen (after being closed for the past two weeks) so as to ensure that expat remittances do not dry up. It is expected that the currency will struggle to continue to be pegged to the greenback and there are also fears that if the political situation does not improve there could be a run on the banks with dire consequences. The economy was in a mess, well before these protests started, with rising unemployment and one of the highest debt ratios in the world at US$ 86 billion, equating to a worryingly high 150% of GDP.

Due to a statistical error, it seems that the UK budget deficit was up to US$ 2.0 billion less than initially reported. The Office for National Statistics has indicated that there was “an error in the measurement of local government social benefits” and that last month’s shortfall was almost US$ 12.0 billion and that the YTD budget deficit, excluding public-sector banks, was US$ 53.0 billion.

Although weakening in Q3, the 1.9% growth was better than market expectations, with consumer spending, although slowing from the previous month’s 4.6%, the highlight at 2.9%. Some of this weakening is attributable to the waning impact of last year’s US$ 1.5 trillion tax cut and the ongoing spat with China. Although there were disappointing results, with a fall in business investment and lower public spending, the stronger than expected returns for housebuilding and consumer spending, that accounts for 67% of the country’s economic activity, points to the fact that any short-term recession is unlikely.

According to speakers at this week’s Success 2020 Arabian Business forum, the UAE is fast becoming a cashless society, driven by several government initiatives and on-going support. The country is helped by the fact that it has a young and dynamic population that embraces new technology – this is supported by traders and merchants keen to make the appropriate infrastructure available. The benefits of going cashless are manifold and could boost the economy by some US$ 2.2 billion, by saving time needed to handle cash.

Strangely, Japan still appears to rely on cash for many transactions, as witnessed at this year’s successful Rugby World Cup. What they do well is to manage big sports events almost to perfection and Dubai would do well to see how they manage to carry this out, with Expo just around the corner. The only minor hiccoughs (apart from the Final’s score that saw South Africa demolish England) were 20-minute toilet breaks for spectators and patchy Wi-Fi. The country is well prepared for the Olympics next year and once again the sports world will be Turning Japanese.

 

 

 

 

Gangsta’s Paradise                                                                                         24 October 2019

Property Finder has noted that for the nine months to 30 September, there were 18.9k transactions involving properties, costing up to US$ 409k (Dhs 1.5 million); this figure was 11.0% up on the previous year, indicating there is a growing appetite for sales at the more affordable end of the market. The main driver appears to be the on-going softening in the Dubai property market, making prices more affordable. Off-plan sales accounted for the majority of the 11k deals so far this year. In the price ranges of US$ 410k – US$ 817k (Dhs 1.5 million – Dhs 3.0 million), US$ 818k – US$ 1.362 million (Dhs 3.0 million – Dhs 5.0 million) , US$ 1.363 million – US$ 2.725 million (Dhs 5.0 million – Dhs 10.0 million) and US$ 2.726 million (over US$ 10 million), there were 6.9k, 2.2k, 0.7k and 0.5k deals respectively, totalling 10.3k. Demand for ready or newly-completed properties grew a marginal 1.0% to 13.1k, with off-plan sales 23.6% higher at 16.1k; the highest number of off-plan sales were seen in Dubai Hills and Downtown – both having sales of 1.7k.

Meanwhile, JLL reported that YTD completions totalled 23.0k, including 6.3k in Q3, bringing the total for Dubai’s portfolio of total residential stock to 542k – a 3.6% increase since January. The company estimates that a further 33k are scheduled to complete by the end of the year – obviously this will not happen! There is no doubt that there has been a marked slowdown in supply, and this is reflected in the fact that projects, comprising only 7.8k new units, have been launched so far in 2019 – the lowest figure in three years.

According to Knights Frank, Dubai property prices have fallen 9.5% over the twelve months to June 2019 – only surpassed by Sydney’s 9.6% – in their survey of 150 cities; only 20% of the total registered annual losses including London, New York, Auckland and Rome. It was noted that in a number of locations, including Dubai, the prime sector continued to outperform the mainstream market but overall, the global market continues in the doldrums; the silver lining is that there is evidence that the rate of decline is beginning to fall. The fastest growth rate was seen in Xi’an, with an impressive 25% growth, whilst the average growth level was at 3.5%, with the average price rise being 5.9% and 2.0% in emerging markets and developed markets respectively.

One of the emirate’s biggest private developers, Nshama, is “waiting for the right time” to launch new projects and is holding back until a bounce returns to the property market. The developer, which is building the 21k-home Town Square community, is also awaiting directions from the newly formed Higher Committee who have been appointed to oversee and advise on the local real estate sector’s future priorities. The demand-supply conundrum continues to phase the sector and one of the main problems facing the new authority is to bring equilibrium to the market, as concern spreads about newly completed homes overwhelming actual demand, forcing further price drops. Nshama indicated that the current market demand is for units that are ready or near-ready; that being the case, the developer will continue to build but cut back on launches until they reach near-completion stage. To date, the developer has handed over 3k units (7.3% of the total) and expects that figure to top 5k by year-end.

To prevent financial catastrophe, in case of a sudden and unexpected slump in the realty sector, the UAE Banking Federation is proposing a cap on lending to real estate companies, which stood at US$ 66.3 billion last year. Any major problem occurring in this market would have a negative impact on the whole banking structure. The current downturn in the real estate market started in 2014, following a marked deterioration in the price of oil and the start of a market oversupply of property. There are now government initiatives afoot – including Expo 2020, long-term resident visas and amendments to freehold property law – that will hopefully pull the sector from its present depths.

Emirates National Oil Company is to enter into competition with the fledgling Al Ghurair-backed start-up, Cafu, whose app allows users to have their car’s petrol tank filled up, at their own residence, with a click of a button. The company is not worried that Enoc may steal some of its market share, suggesting that it will only fuel increased awareness for the benefit of both entities, as the consumer base expands.

It is reported that Creative Zone has acquired an undisclosed stake, at an unknown cost, in insurance comparison platform InsuranceMarket.ae, valued at US$ 80 million. It is part of the Dubai-based business formation firm’s strategy to further the growth of an ecosystem to support start-ups, by becoming a one-stop shop for all the business requirements of a new-start-up. Part of AFIA Insurance Brokerage Services, the company is a digital platform for comparing all types of insurance, having already serviced over 200k since its inception.

Lonely Planet’s Best in Travel for 2020 guide places Dubai at ninth spot for the best cities to visit next year. The top three cities were Salzburg, Washington DC and Cairo. Rather gushingly, it notes “the future is now in Dubai as the superlative-craving emirate launches several boundary-pushing marquee projects in 2020,” including Expo 2020 Dubai, the Museum of the Future and The World Islands, as must-see attractions.

According to Dubai’s Department of Finance, total Expo-related projects will have cost US$ 8.2 billion by the time of its opening on 20 October 2020. Much of the funding has been financed from a budget surplus, as a result of “prudent financial policies”, according to its Director-General, Abdulrahman Saleh Al Saleh. He also revealed that the emirate’s sovereign debt reached US$ 32 billion, equating to 27.9% of GDP (compared to say the 120% mark attained by Australia), whilst the debt-service coverage ratio was only 5.0% of the general budget. The good news for residents is that he confirmed that there would be no increase in government fees, already frozen since March 2018.

The Department has already completed the general policy pertaining to the relationship between public and private sectors, and that PPPs will be seen in many future government joint projects.

The Dubai Free Zone Council has introduced a “one free zone passport” scheme which will allow businesses to operate out of multiple free zones in Dubai through a single license; this will result in cost savings for those entities that currently work out of multiple locations. The council is also considering allowing free zone entities to take up rental contracts from the current twenty-five years to fifty years. It is hoped that such initiatives will make the emirate a leading global destination for investment and business set-up and draw in an increased number of overseas companies and entrepreneurs. This initiative complements the recent regulation that saw free zone-based entities allowed to operate freely in “onshore” Dubai – as well as offshore. The DFZ Council is also reportedly looking at a “Free Zone 10X” platform, which would create a financial market exclusively for free zone enterprises to tap funding through IPO listings.

DP World posted a 1.1% like on like Q3 hike in its global container terminals, handling 17.7 million twenty-foot equivalent units– and over the nine months to September a 0.7% growth to 53.5 million TEUs was recorded. Whilst there was robust growth in Asia, particularly in ATI in the Philippines and China’s Qingdao, its home base Jebel Ali saw a 1.0% decline to 3.6 million TEUs, with volumes stabilising after a shift of low-margin cargo. However, figures were not helped by operations discontinuing in Indonesia’s Surabaya and China’s Tianjin.

A former Pakistani bank employee has fled the country leaving his wife to face authorities investigating five-year scam; he had been accused of embezzling US$ 2 million from a Dubai bank between 2011-2017. The accused transferred money to different accounts, by forging documents and manipulating the amounts of cash. His wife has been charged with criminal abetting and money laundering in a Dubai court, alleging that she withdrew the money via an ATM and subsequently issued cheques to her husband to transfer the money.

TransferWise has been granted a licence by the Abu Dhabi Global Market’s Financial Services Regulatory Authority to operate in the country under the name ‘TransWise Nuqud Ltd’. The low-cost fast money transfer platform will start operations next year and has become one of the first entities to be operational in ADGM’s ‘providing money services’ category. Their entry will ensure that the country’s 50+ banks and exchanges will have to raise their game – by lowering fees and improving service levels – to compete in the lucrative money remittance sector. On a global scale, TransferWise serves 6 million customers and processes US$ 5 billion in monthly customer payments.

Nasdaq Dubai saw the listing of two bonds, with a total value of $1 billion, from the Industrial and Commercial Bank of China. This makes the world’s largest bank by assets the holder of the highest value of conventional bond listings on the exchange by any overseas issuer – at US$ 4.6 billion.

Noor Bank posted a disappointing 12.0% dip in Q3 profit to US$ 50 million, despite revenue being 3.4% higher at US$ 149 million. The results were not helped by a 38.6% jump in impairment charges and an 11.5% reduction in income from Islamic financing to US$ 78 million. For the nine months to 30 September, the bank posted a 12.4% increase in profit to US$ 162 million, whilst operating income was up 6.7% to US$ 436 million. The Dubai-based Sharia-compliant lender is soon to be taken over by its larger rival Dubai Islamic Bank; the Investment Corporation of Dubai has stakes in both financial institutions.

Commercial Bank of Dubai posted a 28.3% Q3 increase in net profit to US$ 99 million, as operating income came in 6.1% higher at US$ 199 million. Based on these results, the bank is looking at record annual figures come the end of December. For the first nine months of the year, there was a 26.1% increase in net profit to US$ 290 million, with operating income 11.1% to the good at US$ 61.0 billion. Impairment allowances for loans and advances and the bank’s Islamic financing portfolio fell 17.7% to US$ 45 million and 2.6% to US$ 143 million respectively.

Etisalat Group reported a 2.1% increase in consolidated nine-month net profit after Federal Royalty, at US$ 1.8 billion, as consolidated revenues topped US$ 10.6 billion. It also posted a 5.0% hike in aggregate subscriber base to 148 million, whilst its UAE subscriber base reached 12.4 million.

The capitalisation of the two UAE bourses grew by 5.6% in 2018 to US$ 244.0 billion and should easily top Dhs 900 billion (US$ 245.2 billion) by year-end. This figure indicates that the capitalisation of traded companies accounted for 63% of the UAE’s GDP (59% in 2017), driven by increased share capital and enhanced FDI flows. Of that total, the banking sector accounted for US$ 127.7 billion, or 52.3%, of the total.

The bourse opened on Sunday 20 October and, having lost 30 points (1.1%) the previous week, regained a slight amount of that deficit to close 4 points up at 2784 by 24 October 2019. Emaar Properties, having shed US$ 0.03 the previous week moved US$ 0.01 higher to close at US$ 1.22, whilst Arabtec having jumped US$ 0.10 last week, nudged up US$ 0.01 to US$ 0.54. Thursday 24 October saw similar – and continuing relatively low – trading of 219 million shares, worth US$ 50 million, (compared to 180 million shares, at a value of US$ 69 million on 17 October).

By Thursday, 24 October, Brent, having gained US$ 2.04 (3.5%) the previous fortnight, kept in positive territory, up US$ 1.48 (1.8%) to US$ 61.39. Gold, having shed US$ 17 (1.1%) over the previous three weeks, was up US$ 7 (0.5%) , closing on Thursday 24 October at US$ 1,498. 

Just days before its planned (perhaps only 2%) partial initial public offering, Saudi Aramco delayed it again with reports that the US$ 2 trillion valuation may be, to put it nicely, on the high side; the IPO was expected to raise US$ 40 billion but the figure may now come in lower. Advisers are awaiting Q3 results which may see the sale figure lowered, with the eventual price being negatively impacted by other factors, such as weak oil prices, a sluggish and moribund global economy, along with September’s attack on the company’s biggest processing plant.

New York authorities are planning to take Exxon Mobil to court over claims it misled investors about the potential costs of climate regulation to its business. This could be the first of many similar cases expected to be faced by oil and gas firms in the future. It is claimed that the oil giant evaluated new projects based on lower cost forecasts for expenses associated with climate change than what was being relayed to investors. By making such investments look less risky, than they actually were, “ExxonMobil made its assets appear significantly more secure than they really were, which had a material impact on its share price.”

South African utility, Eskom, has received a US$ 4.1 billion government lifeline, as it battles to service a US$ 31.0 billion debt, following six months of spasmodic blackouts, caused mainly by previous underfunding, leading to an old and inefficient creaking fleet of coal-fired plants. The state of the country’s power sector is one of the main causes for the South African economy being dragged into contraction. There have been hints that the company has been beset with mismanagement and graft; indeed, with the resignation in May of Phakamani Hadebe, he became the tenth chief executive to quit the state-owned company in a decade.  

The perilous state of the UK High Street has been laid bare, with estimates that 85k retail jobs have been lost over the past twelve months, with Q3 retail numbers 2.8% down on the same period in 2018; full-time jobs saw a 4.5% decline, as part-time employment shed 1.5% of jobs. The quarterly figures were the 15th straight quarter of year-on-year declines, as the proportion of all empty shops touched 10.3%, its highest level since January 2015. The two main drivers continue to be Brexit uncertainty and weak consumer demand, with calls for government reforms, to business rates and the apprenticeship levy, to boost the sector.

In the UK, HM Revenue & Customs has warned Airbnb that an ongoing tax enquiry could lead to legal proceedings against the home rentals site. This was revealed in their latest accounts which had a note that it had been contacted by HMRC over “tax laws or regulations impacting the company’s business”, involving operations and intra-company transactions. There is no smoke without fire when one considers that Airbnb UK paid tax of US$ 189k on profits of US$ 589k, and a US$ 18.4 million turnover, whilst its payments arm had a turnover of US$ 353.7 million but only made a US$ 1.5 million profit and paid tax of US$ 304k. The company claimed it follows the tax laws and that the Airbnb model had boosted the UK economy by US$ 5.4 billion in 2018. The company is not alone in facing criticism about the level of tax it pays in the UK and joins a list of other big global technology firms such as Apple, Amazon, Facebook and Google. Even the Organisation for Economic Co-operation and Development is proposing tax changes, aimed at making such firms pay more tax.

Unable to raise money, WeWork’s board has finally caved in and accepted a Softbank bid to buy billions worth of shares, including US$ 1 billion from co-founder Adam Neumann, who decided not to accept a JP Morgan offer, by receiving his shares, along with a US$ 185 million consulting fee and a credit line.    The Japanese investment giant will take over control of the company, now valued at just over US$ 8 billion – some way off its June proposed IPO price of more like US$ 50 billion, and this despite an H1 loss of US$ 900 million. Yet another case of the market losing its marbles.

Three global tech giants posted mixed Q3 results. Although Amazon reported another 20%+ growth in quarterly sales, (up 24% to US$ 74 billion), a 46.0% hike in shipping costs to U$ 10.0 billion was the main driver in a 25.0% profit decline to US$ 2.1 billion. The company’s new strategy of pushing one day deliveries to its Prime members had two outcomes – increased purchases in that sector but also higher transport costs. The cut in profit, added to a disappointing Q4 sales growth forecast, disappointed market watchers and drove the shares 6% lower on the day.

Twitter shares fell even more – by 17% in early trading – as quarterly results of a 9.0% rise in revenue to US$ 842 million and a US$ 37 million profit were lower than market expectations. The micro-blogging site reported that revenue was hampered by product bugs and unusually low demand over the summer. At the same time, it lowered its Q4 forecasts.

However, Tesla leapt 18.6% on Thursday following the company’s announcement that revenue reached US$ 6.3 billion, with its gross margin up from 18.9% to 22.8%. quarter on quarter – and moving closer to its 25% target; this increase comes despite reductions in the average selling price of its Model 3 but because of operating expenses continuing to head south. At the end of September, Tesla had its highest ever balance in cash and cash equivalents of US$ 5.3 billion.

This month has been a wake-up call for many investors, as at least three leading fund managers have been caught wanting. For example, Mark Denning, a 36-year company veteran, who managed more than US$ 300 billion for Capital Fund, which itself has US$ 2 trillion of assets under management, has been forced to resign after breaking investment rules. A BBC investigation found that, inter alia, he was secretly acquiring shares for his own benefit in some of the same companies as his funds.

A more drastic fall from grace concerns the iconic ‘stockpicker’, Neil Woodford, a former big winner for investors and now leaving many in severe debt. In his first 26 years in business with Invesco Perpetual, anyone who invested US$ 10k at the start would have pocketed US$ 250k when he left to form his own UK Equity Income Fund, which at its peak managed around US$ 13 billion. Now following a rash of poor decision-making and disastrous investments, the company has closed, as big pension funds and armchair investors started pulling out their money in droves. In June, the fund was suspended by its administrators, Link Fund Solutions, valuing what was left at a little over US$ 3.0 billion.

Last Friday, Bryan Cohen, a Goldman Sachs Group Inc. investment banker, was arrested over allegations of insider trading, that reportedly saw US$ 3 million in illicit gains being made. The leaking of non-public information continued for around three years and was tied to pending deals involving Syngenta AG and Buffalo Wild Wings Inc. The bank confirmed it was unaware of the allegations, until the employee’s arrest, and that the investment banker had worked in the consumer retail division.

Malaysian authorities have publicly demanded that Goldman Sachs pay a mouth-watering US$ 7.5 billion in damages for its role in the now infamous 1MDB scandal; however, it seems that probably a third of that figure would be more in line with expectations. By 2013, the bank had picked up over US$ 600 million for helping the fund raise US$ 6.5 billion, much of which went missing under mysterious and shady circumstances. The 94-year old Prime Minister Mahathir Mohamad has pledged that he would recoup money lost by this global scandal and reportedly he has sent Daim Zainuddin, a known top dealmaker, to arrange a quick and sizeable settlement from the US bank. Seventeen current and former bank executives have been charged and face court action in the Asian country.

Unfortunately, for Goldman Sachs, this sordid episode has had impact in other locations such as Abu Dhabi where this once lucrative market has gone flat. Investors have also been probing the firm’s role in a controversial deal involving Etihad Airways. In 2016, three staff members left the bank following alleged breaches of guidelines, when advising a potential buyer on an investment in fast-food company Kuwait Food Co. After missing out on at least US$ 25 billion in deals in the emirate, it is now focussing its emphasis on Saudi Arabia. This week, another of its senior bankers in the UAE has been dismissed over compliance violations.

The Royal Bank of Scotland, still 62% owned by UK taxpayers, has gone backwards as it posted a Q3 US$ 10 million loss, caused mainly by a US$ 1.2 billion charge for PPI (payment protection insurance); this compares to the US$ 1.2 billion profit posted for the same period last year and was the bank’s first quarterly loss since Q4 2017. Its investment banking arm, NatWest Markets, reported a US$ 255 million Q3 loss caused by a “deterioration in economic sentiment for the global economy” and a fall in bond yields.

Westpac continues to rack up costs, now rising to US$ 1.4 billion following the latest addition of US$ 253 million, as a result of its misconduct and shabby treatment of customers. The other three big Australian lenders – ANZ, CBA and NAB – have also seen 2019 provisions higher relating to costs from the banking royal commission, which was highly critical of the unethical and scandalous behaviour of the country’s banking sector. Furthermore, Westpac will also be hit by a significant penalty, (probably in the region of US$ 100 million) from Australian regulators, for its failure to report “a large number” of International Funds Transfer Instructions (IFTIs).

In Australia, the Lower House has passed a controversial bill to ban cash payments of US$ 6.9k (AUD 10k) and that anyone using cash above that limit to pay for purchases could end up with a two-year jail sentence and fines of up to US$ 18k. In a move that would obviously breach individual privacy, the Currency (Restrictions on the Use of Cash) Bill 2019 has been passed by the House of Representatives. The law is supposed to alleviate tax evasion, money laundering and other crimes and would force Australians to use electronic transactions or cheques over cash for payments above the threshold.

The Australian Tax Office is evidently not doing its job properly when its latest report shows that debts, mainly from SMEs, are on the increase, as tax debt hits record highs. In the last tax year, audit activities saw tax funds gain US$ 10.5 billion, whilst US$ 29.4 billion was handed back as tax refunds.

More trouble hit Boeing this week with the unwelcome news that messages were sent between its employees about issues with the automated safety system on the 737 Max prior to its final 2016 certification. The Federal Aviation Administration is “concerned” and has requested an “immediate” explanation for the delay in turning over the documents. Meanwhile, the US plane maker confirmed it is cooperating with the investigation of the 737 Max, and “we will continue to follow the direction of the FAA and other global regulators, as we work to safely return the 737 MAX to service.” Both Boeing and the US regulator have been roundly criticised for inadequate oversight of the risks associated with MCAS (Manoeuvring Characteristics Augmentation System), which was designed to make the aircraft easier to fly. Its shares slumped by 10% on the two days’ trading, following the announcement. The week did not get any better as on Wednesday, it declared a 53% decline in Q3 profits, with a negative cash flow of US$ 2.9 billion, compared to a positive US$ 4.1 billion in 2018.

Despite being one of the chief scaremongers, and apparent Remain supporter, Mark Carney, has indicated that the new Brexit deal struck by the government is “welcome” and a “net economic positive”. Despite the BoE governor’s remarks, and IMF support of the deal, Boris Johnson failed in his attempt to move parliament to vote for immediate departure from the EU. By Thursday, the PM has said he would give MPs more time to debate his Brexit deal if they backed a 12 December general election. His promise to leave the EU by 31 October lays in tatters – despite his best efforts and because of a vacillating and shambolic parliament. So much for the democratic process, with the House of Commons beginning to look like Gangsta’s Paradise.

Won’t Get Fooled Again!                                                                                17 October 2019

Still heading south, albeit at a markedly slower rate, there are indicators that a recovery in the realty sector could soon take traction. Dubai Land Department has reported that YTD, property transactions are 12% higher than in 2018. This week, property website Bayut reiterated that the current environment presents good conditions for all stakeholders – buyers, investors and renters.

Although most locations have seen twelve-month price declines in the region of 6%, lower falls have been reported in Dubai Sports City and Dubai Silicon Oasis. The DLD estimates that last year first-time buyers equated to 66% of total investors. In Q3, villa sales saw a 6.6% decline in average price per sq ft to US$ 600, whilst the decline was higher for apartment sales, with prices 8.1% down at US$ 357.

The latest updates from Luxhabitat show that the most expensive YTD property sale in Dubai was for a villa, at US$ 25 million, located at MBR City, an area that is still under development and away from the usual expensive hot spots. The other three that make up the four most expensive purchases in Dubai this year are US$ 20 million for a penthouse on The Palm, US$ 17 million for a villa in Sector V, Emirates Hills, and the same amount for an apartment in Il Primo, Downtown.

Hilton Worldwide has announced the launch of Hampton by Hilton Dubai Al Barsha, its second such entry in the emirate. The agreement, between the hospitality management company and Abdullah Al Neyadi, will result in an increase in the number of affordable hotel offerings in the mid-range sector, by a further 153 rooms.

There is no doubt that gold and jewellery play an important role in the UAE economy, with precious metals and diamond trading generating 20% of the country’s total non-oil exports. In H1, total trade was 3.0% higher at US$ 49.0 billion, with the global value of trade at over US$ 350 billion. This week, the federal cabinet has approved several policies which will benefit and consolidate the country’s gold and jewellery sector. One of the main aims is to strengthen the country’s global standing by enabling the tracking of gold with international standards being introduced to enhance transparency. Such a step will lead to a positive boost for the local industry and consolidate a currently fragmented sector with the introduction of a federal trading platform that will also be responsible for the supply of gold and marketing the UAE on the worldwide stage.

It just has to be Dubai when Italian designer Antonio Vietri unveiled his latest offering as part of MIDE (Made in Italy, Designed in Emirates) Fashion Week. His latest design, The Moon Star shoes, has been priced at US$ 20 million.

DEWA has decided to select an as yet unnamed contractor to build a 900-megawatt solar power plant in Dubai. The record low bid, at US$ 0.017 cents per kilowatt-hour for the photovoltaic plant, needs further extensive study before further details are released. The plant is phase 5 of the Mohammed bin Rashid Al Maktoum Solar Park project which will generate 5 gigawatts of installed capacity by 2030. The latest bid “represents the lowest price worldwide,” and shows a marked reduction from the US$ 0.073 lowest offer for phase 4 in 2017, submitted by ACWA Power International and Shanghai Electric Group Co.

This week, DEWA also awarded a US$ 267 million contract to Ghantoot Transport & General Contracting and Ghantoot Gulf Contracting to construct their new HQ, Al Shera’a (Arabic for ‘sail’) in Jadaf. Encompassing two million sq ft, the twenty-floor building, (including a basement and four floors for parking, whilst housing 5k), will be the tallest, largest, and smartest government zero energy building in the world.

On the occasion of an official visit by Vladimir Putin, the UAE and Russia signed an agreement to boost air traffic to different cities, within the two countries; further discussions will be held in St Petersburg early next year. This move will undoubtedly expand tourism and trade links for the benefit of both countries. Currently, Russia has moved two places higher to sixth as a source market of inbound tourism for Dubai, with a 28.0% hike in tourist numbers to 678k last year. Other deals, worth more than US$ 1.3 billion, notably in the energy, advanced technology and health sectors, were made.

Among those signed by the Russian president was one with the Investment Corporation of Dubai to “explore mutually beneficial investment opportunities”, with its sovereign fund, the Russia Direct Investment Fund; it will focus on potential investment opportunities in both countries. One other major deal was ADNOC’s sale of a 5% share in the Ghasha concession to Russia’s Lukoil.

Dubai Airport Free Zone Authority posted a 7.9% hike in its H1 total value of foreign trade to US$ 21.0 billion, driven by an 11.0% hike in reexports to US$ 12.2 billion, which equates to 21.0% of Dubai’s total reexports. DAFZA also accounted for 12.0% of the emirate’s foreign trade and saw its trade surplus surge 35% to nearly US$ 3.0 billion. Trade wise, its three biggest countries – India, Switzerland and China – accounted for 50.1% of the total – with figures of US$ 3.8 billion, US$ 3.4 billion and US$ 3.3 billion respectively. So far this year, the likes of Airbus, Michelin and TNA have opened up regional headquarters.

Following the recent collapse of Thomas Cook, it is reported that Dnata has been exposed to its impact which is still being assessed. It is expected that the exposure involves “not a small amount” and will be accounted for in the Emirates Group’s airport services unit’s H1 results. The fallen tour operator, and the world’s largest travel company, was a major customer for its services such as ground-handling and catering.

A new budget airline has been announced with a JV between Etihad Aviation Group and Air Arabia forming Air Arabia Abu Dhabi. This will benefit both airlines, with improved networking opportunities and a wider range of aircraft being made available. The new carrier will operate out of Abu Dhabi International Airport and have board members from both companies who will be responsible for the new airline’s independent strategy and business mandate. Whether this results in more routes (demand) coming online for all the UAE carriers to service – or the opposite (an increased supply chasing similar demand) – remains to be seen. 

Deyaar Development posted a nine month increase in revenue – by 3.6% to US$ 132 million – with profit reported at US$ 14 million. This year, the developer opened the Millennium Atria Business Bay and Millennium Al Barsha which will deliver on-going revenue streams, as well as completing its Afnan District project in Midtown; the second of six residential districts, Dania comprising 579 apartments, should be finished by year-end.

Emirates NBD is to have a 35.4% discounted rights share offering to raise funds of US$ 1.76 billion for overseas expansion and to boost its capital structure. 758.8 million shares will be offered at US$ 2.32 (compared to its US$ 3.58 market value at 16 October). Only last month, Dubai’s biggest bank raised the cap on foreign ownership holding in its shares to 20% from 5%, with expectations that this may double to 40% in the near future.

Dubai Islamic Bank beat market estimates by posting a 1.0% in Q3 profit to US$ 341 million, as income jumped 10.5% to US$ 891 million. The country’s largest Sharia-compliant lender did see impairment charges climb 86.4% to US$ 90 million. Over the first nine months of the year, the bank reported a 20.0% growth in total income to US$ 2.8 billion, whilst profit came in 8.0% to the good at US$ 1.1 billion. The bank is focusing on future double-digit growth which will be boosted by its acquiring fellow Islamic lender Noor Bank, thus creating a Shariah lender, with US$ 75.0 billion in assets.

The DFM has introduced much needed reform for loss-making firms trading on the bourse. The rules dictate that companies posting losses in excess of 50% of their capital base need to explain the reasons for their losses and forward a detailed timetable with a plan to affect a turnaround. Those entities reporting losses of 20% or more of their capital will in future be closely monitored and will be classified and colour-coded, (yellow compared to the red for companies beyond the 50% threshold), on the DFM’s website so investors are aware of their situation.

The bourse opened on Sunday 13 October and, having gained 49 points (1.8%) the previous week, lost 30 points (1.1%) to 2780 by 17 October 2019. Emaar Properties, having nudged US$ 0.01 higher the previous week, shed US$ 0.03 to close at US$ 1.21, whilst Arabtec regained all and a lot more of the US$.0.03 lost the previous week, jumping US$ 0.10 to US$ 0.53. Thursday 17 October saw similar trading of 180 million shares, worth US$ 69 million, (compared to 175 million shares, at a value of US$ 43 million on 10 October).

By Thursday, 17 October, Brent, having gained US$ 1.23 (2.1%) the previous week, kept in positive territory, up US$ 0.81 (1.4%) to US$ 59.91. Gold, having shed US$ 14 (0.9%) the previous fortnight, was US$ 3 (0.2%) lower, closing on Thursday 17 October at US$ 1,498. 

Following a report indicating that crude inventories rose by 10.5 million barrels last week, oil fell, as the market entered an inequilibrium hiatus, with supply growing whilst demand ebbs. With the global economies slowing – and increased new supplies from the US, Brazil and the North Sea – the short-term outlook is dim, unless there is an early end to the global trade/tariff war.

Last year, Softbank raised US$ 21 billion by selling some of its shares in the market – it was estimated bankers and advisers picked up US$ 535 million in fees. Next month, Saudi Aramco is to dip its toes in the water and offer about US$ 40 billion in an IPO; the oil giant is set to pay between US$ 350 million-US$ 450 million to a group of more than 20 banks, working on its initial public offering, with JPMorgan Chase & Co and Morgan Stanley expected to be the main beneficiaries.

One of the recipients of this year’s Nobel prize for Economics, Esther Duflo, becomes not only the second woman to receive the US$ 1 million award since its 1969 inception, but, at 46, also the youngest. She shares the prize along with her husband (and her PhD supervisor), Abhijit Banerjee, and Michael Kremer. Their research, focused on poor communities in India and Africa, indicated which investments were worthwhile and also what had the biggest impact on the lives of the poorest people. In real terms it had a positive impact on the ability to fight global poverty in practice with one of their studies showing whether medicine and healthcare should be charged for and, if so, at what price.

Hunter Biden has decided to resign from the board of BHR (Shanghai) Equity Investment Fund, following fierce criticism of his role by President Trump. The 49-year old son of former US vice-president Joe Biden has denied any wrongdoing in either China or the Ukraine as a result of his connection with the Chinese Equity Investment Fund and confirmed that he did not profit from his connection.

Lina Di Falco, 54, lost her case against Emirates after claiming that the airline did not provide her with enough water on her 2015 twelve-hour flight – and she now faces potential costs running into hundreds of thousands of dollars. She had claimed that the denial of adequate water caused her to faint and fall on her flight from Melbourne and that the resultant injury led to constant pain, two months off work and the failure of her marriage.

A worrying statistic for most Australians is that the country has the world’s second largest household debt, (just behind Switzerland), equal to about 120% of the country’s GDP. In other words, household debt is 20% more than what the country produces every year. In the past twenty eight years – around the time of the country’s last recession – the debt has almost trebled and housing debt has more than doubled in real terms since the turn of the century; then, the average mortgage debt stood at US$ 109k, compared to the current level of US$ 239k.

There was good news and bad news for the Australian employment sector, with the unemployment level dipping marginally in September to 5.2%, helped by the creation of 26.2k full-time jobs and the participation rate nudging lower to 66.1%; the underemployment rate dropped to 8.3%. However, most observers expect the situation to deteriorate early next year, with the rate moving inexorably north toward the 5.5% level and moving in the opposite direction to the RBA’s 4.5% target. The next meeting of the Reserve Bank on 05 November will produce no fireworks, with expectations of a further rate cut dampened by the news.

As China’s manufacturing sector slows down, declining at its fastest rate in over three years to an annualised 1.2%, it seems inevitable that the government will introduce further stimulus packages to boost local demand. It comes at the same time that consumer prices jumped at their fastest pace in almost six years, driven, by of all things, a marked increase in pork prices brought about by the country’s hog herds being hit by African swine fever. There is every chance that China’s GDP could fall below 6.0% in Q3, as both imports and exports are being hit by the bilateral dispute with the US. Expect cuts in interest rates and increased government spending, among other stimulus measures, to be implemented shortly to help boost the slowing economy.

Following “a very, very good negotiation with China,” an optimistic Donald Trump has agreed to directly meet with Vice Premier Liu He at the White House on Friday. Earlier, the US government blacklisted 28 Chinese entities, allegedly “implicated” in human rights abuses, and also imposed additional visa restrictions for several Chinese government officials. Of that number, all but eight, (that included some of China’s leaders in artificial intelligence), were government security bureaus. This follows reports of more than a million Uighurs, and other mostly Muslim minorities, being detained in detention camps in Xinjiang province.

Not famed for their forecasting skills, the IMF have made their fifth revision, with a 3.0% 2019 global growth now expected in what is described as a “synchronised slowdown” – and the slowest growth rate in the eleven years since the GFC. The main driver appears to be a slowdown in emerging market economies, brought about by trade tariffs, increased protectionism and slowing manufacturing, along with uncertainty relating to trade and geopolitics. It is expected that there will be a minor recovery next year to 3.4% – but don’t hold your breath!

Without monetary stimulus by many central banks, the growth would have been more dire at 2.5%. More worrying, the world body estimates that 2020 growth will fall a further 0.8% if scheduled October and December tariffs are imposed. The two superpowers will see reduced growth with levels of 2.4% (for the US) and 6.1% for China. However, in a US election year, expect the incumbent president to pull out a few rabbits from the hat.

So much for the scaremongers – UK 2019 growth is expected to weaken from 1.4% to 1.2%, year on year, the same level as the EU which is expected to have the same growth level but down from its 2018 growth figure of 1.9%.

The economies of the Middle East and Central Asia will grow 0.9 per cent this year, rising to 2.9 per cent in 2020 – well down on previous estimates of 1.8% and 3.3% – and driven by the impact of US sanctions on Iran’s economy; Iran is set to contract by a massive 9.5%, compared to 4.8% last year, with inflation moving higher to 36%. Based on average oil prices of US$ 61.78 this year and $57.94 next, Saudi Arabia’s economy will trickle to a miserly 0.2% in 2019. Meanwhile, Australia – in its 29th consecutive year of economic growth – has seen its forecast cut from 2.1% to 1.7% but is still to have the fastest growth of any G7 economy, except that of the US.

There was a surprise to see a September 0.3% decline in US retail sales, as consumer confidence wanes which will probably result in a third straight Federal Reserve interest-rate cut; this follows a revised 0.6% increase posted in August. Following the news, prices on ten-year Treasuries rose and US stocks fell. The hope is that a truce in the Sino-US trade war, and no further tariff increases, would be the optimum output which would have a positive impact on US economic data and consumer confidence. There is a feeling that there has been a loss of economic momentum ahead of the 2020 re-election year.

However, there were signs of a manufacturing recovery following the battering it received earlier in the year with Donald Trump’s trade shenanigans. In Q3, US manufacturing rose 1.1%, driven by computers/electronics, autos and appliances; this was still 1.0% lower over the past twelve months. The month-long GM strike, involving 50k, has not helped figures but fortunately there are signs that a deal on the horizon could see an end to the work stoppage in the coming days.

Yet again, the many doomsayers have got it wrong when it comes to sterling, as the currency headed to its highest rate in three months on Monday to US$ 1.2682 (as well as jumping 1.7% higher to Euro 1.1489). The hike came about because of renewed hopes of a last-minute Brexit deal, initiated by a UK/Irish prime ministerial meeting, concluding that there was “a pathway to a possible deal”, and even the EU Brexit negotiator Michel Barnier speaking of a constructive” meeting with UK Brexit secretary, Stephen Barclay.

On Thursday, the pound reached its highest level – at US$ 1.29 – on news that Boris Johnson had secured a Brexit agreement with the EU Mandarins. There is no doubt that a majority of the UK population (and the financial markets) is sick and tired of Brexit and just want a quick resolution – parliament may think otherwise when they vote on Saturday. It is anybody’s guess whether we Won’t Get Fooled Again!

Easy Money                                                                   10 October 2019

The Sheikh Zayed Housing Programme has approved 522 housing assistance applications for Emirati citizens, totalling US$ 111 million; the initiative is in conjunction with housing institutions around the UAE. Encompassing three residential districts, the project includes 341 residences in Dubai’s Tolerance Village, as well as two others in Ajman and Ras Al Khaimah.

Last year, Gulf Sotheby’s UAE operations acquired SPF Realty; this month, an exit agreement sees the firm back in the hands of Ranjeet Chavan. He has been joined by three other founding members and plans to revive the brand and has targeted a sales volume of US$ 204 million in the first year of relaunch, focusing on inward investments, preferably at the premium end. Whilst acknowledging that real estate prices may continue heading south, Chavan is certain that the market will see a turnaround and a return to new peaks at some point.

Indeed, employment figures released by the Central Bank reiterates the importance of the real estate – and associated – sectors to the country’s economy. It is estimated that the realty and construction sectors account for 45.7% of the country’s workforce and that in Q2, these two sectors grew by 5.0% and 8.2% respectively, well up on the 4.4% and 4.9% growth returns seen in Q1.

Dubai Municipality has launched a PPP (private-public partnership), with French company Veiola, to build a high-tech biogas power generation plant. The Warsan Sewage Treatment Plant will use biogas to produce clean energy and aims to reduce CO2 emissions by 31k tonnes annually, equivalent to 7k homes that will convert 58k cu mt per day of biogas into electricity. Work on the 25-year project, which will reduce the annual operating costs of the sewage treatment plant by using the biogas, will commence in 2021.

Dubai residents will soon be able to hire a driver for their vehicles at an hourly cost of US$ 11; the requisite DTC app should be running by the end of the month. Another new service will allow users to request an electric Tesla vehicle, a family limo, a vehicle for people of determination, a dedicated limo for ladies or a standard limo; costs will be lower than local rivals, Uber and Careem.

This November’s Dubai Air Show expects to host 87k aerospace trade professionals and an 8.3% increase in exhibitors to 1.3k, with some major announcements expected. However, already troubled Rolls Royce has indicated that there is little likelihood of a US$ 21 billion engine order for seventy new A350 and A330s, (as well as restructured engine orders for the remaining A380s on order), being announced at the show in  November; the UK engine-maker cites the main reason being concerns involving the price and the performance of the planes. This comes after Emirates indicated that it would no longer accept jets that did not meet specifications given by Airbus, Boeing and their engine providers. It also has forty Boeing 787s on order and the airline is concerned about the engines’ reliability and that ongoing issues had not been resolved.

It is estimated that the air transport sector contributes 13.3% to the UAE GDP, equating to US$ 47.4 billion, and adding 800k jobs. IATA estimate that if the government continues with its current positive agenda for the sector, the market could generate an extra US$ 80 billion to the GDP and add a further 620k new jobs by 2037.

The Federal Tax Authority will introduce an excise tax on smoking devices and sweetened beverages as from 01 December 2019; it has requested that producers and importers register early to avoid late registration fines. In October 2017, the FTA introduced a tax on harmful goods, (encompassing 1.7k items), such as soft and energy drinks and tobacco – with duties of 60%, 14% and 26% respectively.

H1 saw Dubai post a 5.0% hike in non-oil foreign trade to US$ 184.2 billion (and 87% higher over the past decade). Despite a tough global trading environment, Dubai has managed to increase both exports (17.0% higher at US$ 20.7 billion) and reexports, up 3.0%, at US$ 57.2 billion. Imports rose 4.0% to US$ 106.3 billion. Trade volumes climbed 31.0% in H1 to 56 million tonnes, with exports, reexports and imports higher by 46%, 39% and 26% at 10 million, 9 million and 38 million tonnes.

It is reported that the UAE, along with Switzerland and the Marshall Islands, will soon be removed from an EU blacklist of countries deemed to be tax havens. It was only last March that the country was returned to the list, first drawn up in 2017, much to the dismay of the government. According to local officials at the time “this inclusion was made despite the UAE’s close cooperation with the EU on this issue and ongoing efforts to fulfil all the EU’s requirements”.

A US$ 436 million Etihad Railway contract has been awarded to Hitachi Rail, relating to systems and integrations work for the UAE’s national railway’s second phase. It involves design and build of the power distribution network and electronics subsystems, that runs for 800 km. This the latest major contract seen this year following March awards totalling US$ 409 million to extend the network by a further 605 km and deals of US$ 1.2 billion in July for lines stretching 216km and 94 km, connecting the network to Khalifa Port and Khalifa Industrial City, as well as to Jebel Ali Port.

To celebrate, and in keeping with, the UAE’s Year of Tolerance, the Ministry of Human Resources and Emiratisation has cancelled fines, prior to 01 August, involving 27k companies and 12k workers. Furthermore, Jebel Ali Free Zone came to the party, by waiving US$ 10 million in fines owed by businesses within the free zone.

Troubled Arabtec Holding has secured a US$ 76 million contract through its wholly owned subsidiary, Target Engineering. The Saudi Aramco deal involves the expansion and upgrade of a water disposal facility at its Qatif’s gas oil separation plant.

The bourse opened on Sunday 06 October and, having shed 93 points (2.5%) the previous three weeks, gained 49 points (1.8%) to 2810 by 10 October 2019. Emaar Properties, having declined US$ 0.12 the previous fortnight, nudged up US$ 0.01 to US$ 1.24, with Arabtec, gaining US$.0.03 the previous week, losing that gain and down US$ 0.03 to US$ 0.43. Thursday 10 October saw improved trading of 175 million shares, worth US$ 43 million, (compared to 80 million shares, at a value of US$ 24 million on 03 October).

By Thursday, 10 October, Brent, having shed US$ 6.63 (10.7%) the previous fortnight, regained some of that loss, up US$ 1.23 (2.1%) to US$ 59.10. Gold, having shed US$ 9 (0.9%) the previous week, was US$ 5 (0.4%) lower, closing on Thursday 10 October at US$ 1,501. 

US sanctions are beginning to hurt the Iranian economy, as China National Petroleum Corp pulls out of a US$ 5 billion deal to develop a portion of Iran’s massive South Pars offshore natural gas field; the 2015 agreement came after the global nuclear deal  and initially involved Total SA, CNPC and Iran’s PetroPars, with shares of 51.1%, 30.0% and 19.9% respectively. Total had earlier withdrawn from the agreement over US sanctions so now there are no international parties to support this venture. This latest episode is bad news for the sector that needs international partnership to utilise the fact that it has the world’s second-largest known reserves of natural gas and fourth-largest oil reserves.

Samsung Electronics has announced an expected 56.2% slump in Q3 profits to US$ 6.4 billion, (on the back of a 5.3% fall in revenue), driven by a dismal performance in the global chip market. With the decline in semiconductor prices, and weakened demand for its mobile devices, this will be the fourth straight quarter of profits heading south. It still has a 23% share of the global smartphone market and is ahead of Huawei, Oppo and Apple in fourth. Although the company gained some market share, because of the US trade ban on Huawei with its mid-to-low Galaxy A handsets, and increased demand for its OLED display panels, it has suffered from a trade war between Japan and South Korea, stemming from World War II disputes.

A 40-year old independent family travel agency has agreed to acquire the 555 UK outlets of the fallen Thomas Cook Group; Hays has already recruited 421 of its former staff members, with many more expected to join their ranks. This comes the same week that the government completed the country”s biggest peacetime repatriation, returning 140k stranded Thomas Cook customers from overseas locations.

The week that many parties were set to sign an agreement to formally join Facebook’s controversial Libra Association, PayPal pulled out “to continue to focus on advancing our existing mission and business priorities”. This is a severe blow to Facebook Inc’s efforts to develop a digital currency which has already faced severe government pressure and criticism. Despite the withdrawal, the payments company remains committed “to remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future”. In other words, glad to get out when it can.

Having culled 4k posts in August, 2% of its labour force, (as well as seeing a political resignation of its chief executive, John Flint), there are reports that HSBC may be laying off a further 10k; much of this will see the loss of high-paid roles.  Like other banks, it is struggling with almost negative interest rates, the tariff war and even Brexit. Interim boss Noel Quinn thinks this is an opportune moment to reduce its cost base, a large proportion of which is payroll driven. All this is despite H1 profit jumping 18.6% to US$ 8.5 billion – what would have happened if profit levels had dipped? There has been recent downsizing by the likes of Commerzbank, Deutsche Bank and Société Générale with job cuts of 4.3k (10% of the payroll), 18k and 1.6k respectively.

India has cut interest rates for the fifth time (by a total of 135 bp) this year in a continuing bid to boost its slowing economy and to ensure that inflation levels remain within the 4% target; the 25bp reduction sees the benchmark repurchase rate at 5.15%. The central bank also reduced its 2019 growth forecast to a seven year low of 6.1%, down from a previous estimate of 6.9%. The markets were not impressed, as the benchmark stock index and the rupee fell, along with ten-year bonds rising to 6.65%. There is no doubt that further cuts are needed and will be seen in Q4.

One area of many concerns for the Indian economy is the lack of liquidity to fund construction of apartment complexes, not helped by last year’s default of one of the country’s shadow banking sector’s leading lenders, Infrastructure Leasing & Financial Services. Now the loans from the bloated shadow-banking sector, that were fuelling the property boom, have all but dried up, leaving a total of US$ 63 billion of stalled residential projects across the country. The end result sees an offload of properties at discounted prices, developers unable to fund construction and stalling on repayments as well as shadow banks failing, all because cash flow has dried up.

In September, figures showed that the US unemployment rate had fallen to a 50-year low – down to 3.5% from 3.7% – with a revised168k and 136k jobs created in August and September. It is argued that 100k new jobs are needed each month to keep up with growth in the working-age population. Although there was weak data, with manufacturing activity hitting a decade low, along with a sharp slowdown in services industry growth (at a three-year low), the employment figures were a counterbalance easing immediate recession worries. The US economy has been in continuous expansion for the past eleven years and to keep this trend going, it seems that a further interest rate cut is inevitable this year, with a possibility of a second one in December.

Several former colleagues have gone to war with Mario Draghi, criticising his latest monetary-stimulus initiative and the ECB’s stance to its inflation goal. They believe (quite rightly) that “interest rates have lost their steering function and financial stability risks have increased. The longer the ultra-European Central Bank President’s low or negative interest rate policy and liquidity flooding of markets continue, the greater the potential for a setback.” They do not agree with a myriad of issues, including the financing of governments, through asset purchases, which restarted last month, arguing that with low rates, it keeps weak banks and companies afloat. Other concerns include Draghi’s mistaken diagnosis and approach to complying with the price-stability mandate and the adverse effect of negative interest rates on the entire financial sector.

One has to agree with Oswald Gruebel, once a major figure in the Swiss bank fraternity, who has criticised negative interest rates. He reasons that negative interest rates point to the fact that “money is not worth anything anymore,” and that the financial industry will continue to shrink as long as such rates continue. The world’s economy is undoubtedly suffering – and will continue to do so –  from too much Easy Money!